UOB Kay Hian Private Limited
August 12, 2025

Keppel Ltd’s S\$1 Billion M1 Divestment: Unlocking Value and Fueling Future Growth

Overview: Strategic Move Sets Stage for New Growth

Keppel Ltd, a leading asset manager and operator in Singapore, has announced the sale of most of its M1 assets to Tuas Limited at an enterprise value of S\$1.43 billion. This transaction will see Keppel receiving cash proceeds of S\$985 million after adjusting for its 83.9% stake and excluding debt, marking a pivotal step in its journey to become an asset-light global asset manager. The retained portion—Keppel’s high-growth Information and Communications Technology (ICT) business—remains valued at S\$300 million and complements its expanding digital infrastructure portfolio.

Key Transaction Details and Financial Impact

• Enterprise Value: S\$1.43 billion for the majority of M1 assets.
• Keppel’s Cash Proceeds: S\$985 million (after stake adjustment & debt exclusion).
• EBITDA Multiple: Sale based on 7.3x EBITDA.
• Retained ICT Business Value: S\$300 million (part of Keppel’s digital infrastructure strategy).

Improved Financial Metrics Post-Sale

• Return on Equity (ROE): Pro forma 16.0% (up from 15.4%).
• Net Debt/EBITDA: Reduced from 2.4x to 1.7x if all proceeds used for debt repayment.

Potential Uses for S\$985 Million Proceeds

Keppel’s management has yet to commit to a specific use for the proceeds, keeping options open for:

• Reinvestment in growth opportunities (possible expansion in fibre optic cable business).
• Loan repayment to strengthen balance sheet.
• Dividends or capital return to shareholders.

The transaction awaits regulatory approval by Infocomm Media Development Authority and is expected to close in the coming months, after which Keppel will announce its final decision.

One-Time Non-Cash Loss and Historical Gains

• Impairment Charge: S\$222 million non-cash loss in 2025 due to sale price vs. carrying value (intangibles & goodwill).
• Historical Gains: Since 1994, Keppel estimates cumulative cash gains from M1 at over S\$700 million, excluding the current divestment and dividends.

Detailed Financial Performance and Projections

Connectivity Segment: What Remains After M1 Sale?

Following the divestment, Keppel retains its ICT business, which has experienced robust growth due to increasing digitalisation in Singapore, Vietnam, and Malaysia. Key assets include AsiaPac Technology, a one-stop ICT solutions provider specializing in hybrid multi-cloud transformation for enterprises and government clients, with minimal capital expenditure aside from acquisitions.

Tuas Limited: Buyer Profile and Strategic Fit

Tuas Limited, listed on ASX, operates Simba Telecom’s mobile network in Singapore and offers fibre broadband, cloud services, and smart home solutions under the MyRepublic brand across Australia, Indonesia, New Zealand, and Singapore. The lack of overlap between Tuas and M1 businesses makes this acquisition attractive. In 2024, Tuas generated A\$117 million in revenue, recorded a loss of A\$4.4 million, but maintained healthy operating cash flow of A\$60 million. Tuas intends to raise at least A\$416 million via placement and share purchase plans.

Earnings Revision and Risk Assessment

• 2025 Forecast Net Profit: Lowered by 10.4% due to the S\$222 million non-cash loss and S\$114 million gain from the sale of Saigon Sport City (70% divestment).
• 2026-2027 Forecast Earnings: Reduced by 2.6-2.7% to account for the loss of M1’s annual S\$40-50 million profit contribution.

Valuation and Updated Recommendations

• BUY Rating: Maintained with a raised target price of S\$10.46 (previously S\$9.51).
• Valuation Changes: M1 value removed from connectivity segment; infrastructure segment valuation increased from 8x to 10x PE, reflecting the addition of the hydrogen-ready 600MW Sakra cogeneration plant.
• Valuation Discount: Infrastructure segment trades at an 18-20% discount to Asia-Pacific utilities peers (2025F PE of 12.5x).

*Others include Keppel Infrastructure Trust, Keppel Pacific Oak REIT, Floatel, and private funds.

Share Price Catalysts and Strategic Milestones

• Delivery of the floating DC park in 2025.
• Sale of legacy rigs, potentially leading to earlier-than-expected capital returns.
• Growth in AUM for asset management business, targeting S\$100 billion by end-2026.
• Progress toward monetising S\$10-12 billion of assets by end-2026.
• Positive impacts from M&A transactions related to the Bifrost asset.

Balance Sheet and Cash Flow Highlights

Profitability and Growth Metrics

• EBITDA Margin: 21.6% (2023), rising to 27.3% (2026F).
• Net Margin: Improving from 14.2% (2023) to 16.1% (2026F).
• ROE: Expected to stabilize around 8%.
• Turnover: Projected decline in 2025 (-7.2%), followed by 6.4% growth in 2026.

Conclusion: Keppel Positioned for Asset-Light Global Growth

Keppel’s decisive move to divest most of its M1 assets marks a strategic pivot, unlocking nearly S\$1 billion in cash and refocusing its efforts on higher-growth, asset-light segments such as digital infrastructure and ICT. With strengthened financial metrics, improved ROE, and reduced leverage, Keppel is well-positioned to capitalize on future investment opportunities and deliver shareholder value. The raised target price and maintained BUY rating underscore the positive outlook for Keppel as it advances toward its ambitious growth and monetisation targets.

Disclosures

This article is based on the latest broker research as of August 12, 2025. Investors should consult with their financial advisors before making investment decisions.