CGS International
August 11, 2025
Keppel Ltd’s Strategic Divestment Unlocks Value: Special Dividend, Asset Monetization, and Robust Financial Outlook
Overview: High Conviction Play with Special Dividend Upside
Keppel Ltd has emerged as a high conviction stock pick for FY25, with expectations of significant share price upside driven by its strategic divestment of M1’s telco business, promising asset monetization targets, and a robust capital return plan. CGS International maintains its “Add” rating with an unchanged target price of S\$10.23, suggesting a compelling 19.2% upside from the current price of S\$8.58.
M1 Divestment Delivers Higher-than-Expected Proceeds
On August 11, 2025, Keppel announced a landmark agreement to divest its 83.9% effective stake in M1’s consumer telco business to Simba Telecom for cash proceeds of S\$985 million. The deal values M1 at an enterprise value (EV) of S\$1.43 billion, translating to 7.3x FY2024 EV/EBITDA—well above prior estimates of S\$700m-900m (6-7x EV/EBITDA). Notably, this valuation is in line with the 7.6x multiple paid by Keppel for M1 in 2019.
Completion of the transaction remains subject to regulatory approval from Singapore’s Infocomm Media Development Authority (IMDA). The sale comprises M1’s consumer operations (M1 Shop, M1 Net, Antina, and M1 Network), while the ICT business, investment vehicle M1 Telinet, and MiWorld property will be retained by Keppel, with an estimated book value of S$300 million (including goodwill).
Financial Impact: Loss on Disposal and EPS Considerations
Keppel anticipates a proforma loss on disposal of S\$222 million, primarily attributable to goodwill from the 2019 acquisition. Excluding this loss, and assuming full repayment of S\$985 million in debt, Keppel’s FY24 EPS would have seen a minor decline of 1.5%.
Capital Allocation: Growth, Debt Repayment, and Special Dividend
Keppel plans to allocate divestment proceeds across three objectives: growth, debt reduction, and shareholder returns. For analytical purposes, one-third of proceeds is assumed for each use. This translates into a projected special dividend per share (DPS) of S\$0.16 in FY25, bringing total DPS to S\$0.51—equivalent to a 5.9% yield.
DPS Potential Table
| Payout from Proceeds |
Special DPS (S\$) |
Normal DPS (S\$) |
Total DPS (S\$) |
TP \$ on Implied Historical Avg Yield (5.4%) |
| 20% |
0.11 |
0.35 |
0.46 |
8.50 |
| 30% |
0.16 |
0.35 |
0.51 |
9.51 |
| 40% |
0.22 |
0.35 |
0.57 |
10.15 |
Keppel’s dividend yield tracks favorably against its historical average of 5.4% from 2020 to July 2025.
Asset Monetization Targets: Progress, Pipeline, and Outlook
Keppel’s year-to-date asset monetization stands at S\$2.2 billion, forecasted to rise to S\$2.7 billion by year-end 2025, including S\$500 million from European real estate and connectivity assets, plus logistics divestments in China. Since October 2020, announced monetization totals S\$9.6 billion—approaching management’s S\$10bn-12bn target by 2026. The full pipeline includes S\$14.4bn of non-core assets for divestment by 2030F, split between S\$4.8bn in offshore & marine assets and S\$8.8bn in real estate.
Peer Comparison: Sector Leaders and Valuation Multiples
A detailed peer comparison highlights Keppel’s competitive positioning in terms of market cap, EPS growth, ROE, and dividend yield. Below is a summary table of major conglomerates and shipbuilders:
| Company |
Ticker |
Recommendation |
Current Price (S\$) |
Target Price (S\$) |
Market Cap (US\$ m) |
CY25F P/E |
CY26F P/E |
CY27F P/E |
Recurring ROE (%) |
Dividend Yield (%) |
| Keppel Ltd |
KEP SP |
Add |
8.58 |
10.23 |
12,111 |
18.1 |
16.5 |
15.3 |
7.5 |
4.1 |
| Capitaland Investment |
CLI SP |
Add |
2.77 |
4.30 |
10,749 |
16.9 |
15.8 |
15.0 |
5.8 |
4.3 |
| Seatrium Ltd |
STM SP |
Add |
2.37 |
2.80 |
6,243 |
26.4 |
17.5 |
13.7 |
4.6 |
0.8 |
| Yangzijiang Shipbuilding |
YZJSGD SP |
Add |
2.89 |
3.90 |
8,849 |
8.0 |
7.5 |
7.1 |
27.6 |
4.9 |
| Sembcorp Industries |
SCI SP |
Add |
6.49 |
8.02 |
8,984 |
12.0 |
10.4 |
9.8 |
16.6 |
3.5 |
| ST Engineering |
STE SP |
Add |
8.62 |
8.40 |
20,934 |
32.6 |
28.7 |
26.2 |
28.7 |
2.1 |
Sum-of-the-Parts Valuation: Keppel’s Diverse Portfolio
Keppel’s SOP valuation aggregates contributions from infrastructure, real estate, connectivity, fund management, and rig businesses:
- Infrastructure (ex-KIT): S\$7,349 million (4.02/share, FY26F P/E 12x)
- Keppel Land investment properties: S\$4,479 million (2.45/share, FY24 book value, 40% China discount)
- Development properties: S\$2,229 million (1.22/share, 30% discount)
- Tianjin Eco City: S\$403 million (0.22/share, 40% discount)
- Listed REITs and trusts: S\$2,863 million (1.56/share)
- Connectivity: S\$2,350 million (1.28/share, FY26F P/E 10x)
- Fund management: S\$2,834 million (1.55/share, FY26F P/E 15x)
- Rig co and Floatel: S\$4,395 million (2.40/share)
- Private funds: S\$1,532 million (0.84/share)
- Net debt: -S\$9,719 million (-5.31/share)
Total SOP value: S\$18,714 million (S\$10.23/share)
Financial Forecasts: Steady Growth and Improving Margins
Keppel’s financial outlook remains solid, with moderate profit growth and improving margins:
| Year |
Net Profit (S\$ m) |
Core EPS (S\$) |
Core EPS Growth (%) |
FD Core P/E (x) |
Recurring ROE (%) |
P/BV (x) |
DPS (S\$) |
Dividend Yield (%) |
| Dec-25F |
864 |
0.47 |
3.87 |
18.08 |
7.67 |
1.37 |
0.35 |
4.08 |
| Dec-26F |
944 |
0.52 |
9.27 |
16.55 |
8.19 |
1.34 |
0.36 |
4.20 |
| Dec-27F |
1,020 |
0.56 |
8.00 |
15.32 |
8.62 |
1.30 |
0.38 |
4.43 |
Balance Sheet and Cash Flow Highlights
- Total cash and equivalents: S\$2,302m (Dec-24A), rising to S\$3,012m (Dec-27F)
- Total current assets: S\$6,619m (Dec-24A), S\$7,992m (Dec-27F)
- Net debt: -S\$9,719m (Dec-24A)
- Free cash flow to equity: S\$1,644m (Dec-24A), S\$854m (Dec-27F)
- Net dividend payout ratio: 73.1% (Dec-24A), declining to 67.9% (Dec-27F)
- Operating EBITDA margin: 21.6% (Dec-24A), trending up to 22.7% (Dec-27F)
Key Metrics and Ratios
- Revenue growth: -5.24% (Dec-24A), 4.31% (Dec-25F)
- Gross interest cover: 2.97 (Dec-24A), climbing to 3.41 (Dec-27F)
- ROIC: 10.7% (Dec-24A), increasing to 15.2% (Dec-27F)
- Accounts receivables days: 92 (Dec-24A), improving to 78.48 (Dec-27F)
- Inventory days: 185.0 (Dec-24A), stable at 186.4 (Dec-27F)
- Accounts payables days: 205.4 (Dec-24A), rising to 245.2 (Dec-27F)
Price Performance and Shareholder Base
- Price performance: 1M +11.4%, 3M +27.3%, 12M +44.7%
- Major shareholders: Temasek Holdings (20.6%), BlackRock (5.2%), Vanguard Group (3.0%)
- Current shares outstanding: 1,822 million, Free float: 78.8%
Conclusion: Keppel Poised for Growth with Asset Monetization and Dividend Upside
Keppel Ltd stands out as a diversified conglomerate with a clear path to value creation, underpinned by successful asset monetization, disciplined capital management, and a promising special dividend. The combination of robust financials, a healthy pipeline of divestments, and sector-leading returns positions Keppel as a top pick for investors seeking growth and income in the Singapore market.
Recommendation Framework
- Add: Total return expected to exceed 10% over the next 12 months.
- Hold: Total return expected between 0% and +10%.
- Reduce: Total return expected to fall below 0%.
Sector and Country Ratings
- Overweight: Above-market cap-weighted recommendation.
- Neutral: Neutral cap-weighted recommendation.
- Underweight: Below-market cap-weighted recommendation.
Distribution of Stock Ratings and Investment Banking Clients (Q2 2025)
- Add: 70.6% (1.1% investment banking clients)
- Hold: 20.5% (0.5% investment banking clients)
- Reduce: 8.9% (0.5% investment banking clients)
- Coverage: 561 companies
