Keppel Ltd. Completes S\$8.4 Million Data Centre Divestment: What Retail Investors Need to Know

Key Points from Keppel’s Latest Disposal Announcement

• Keppel Ltd. has fully divested its remaining interests in two data centre buildings located at 82 Genting Lane, Singapore (KDC SGP 7 and KDC SGP 8).
• The transaction involves the sale of a 51% stake in Memphis 1 Pte. Ltd. and a 0.51% interest in New Class B Notes issued by Memphis 1.
• The buyer is Perpetual (Asia) Limited, acting as trustee of KDCR Singapore Sub-Trust 1 under terms set out in a previously agreed Master Agreement.
• Total consideration for the divestment is up to approximately S\$8.4 million, with S\$6.6 million paid on completion and up to S\$1.8 million contingent on a future lease extension.
• The agreed value for the data centres was set at S\$1,046.3 million, based on independent valuations and Master Agreement terms.
• Following this deal, Keppel no longer holds any interest in the properties or Memphis 1.
• The transaction is classified as “non-disclosable” under Chapter 10 of the SGX Listing Manual and is not expected to have a material impact on Keppel’s net tangible assets or earnings per share for the current financial year.
• No directors or controlling shareholders of Keppel have any interest in the divestment, outside their existing shareholdings.

What Shareholders Need to Know

This news marks the final exit of Keppel from the ownership of two major Singapore data centre assets. Shareholders should note several potentially price-sensitive factors:

• Keppel’s data centre monetisation strategy continues: This divestment aligns with Keppel’s ongoing strategy to recycle capital and focus on asset-light models. Investors may interpret the full exit as a signal of Keppel’s strategic direction, potentially influencing share valuations based on future expectations for asset recycling and capital deployment.
• Transaction value and process: The consideration is up to S\$8.4 million, which includes a conditional payout (up to S\$1.8 million) linked to a possible ten-year lease extension. If the lease is extended, Keppel stands to gain additional proceeds, though this is not guaranteed.
• Valuation transparency: The asset value was anchored to independent valuations averaging S\$1,055.5 million, with the final net asset value fixed at S\$1,046.3 million. This reflects a disciplined approach to price negotiation and may instill confidence in Keppel’s governance and asset management.
• Non-material financial impact in FY2025: The company explicitly states the transaction will not materially affect its net tangible assets or earnings per share for the year. Retail investors should be aware that while the deal demonstrates strategic execution, it is not expected to move the needle on short-term financial metrics.
• No conflicts of interest: There is no involvement from directors or controlling shareholders beyond their existing stakes, reducing concerns of related-party risks.

Detailed Transaction Breakdown

The divestment consists of two parts:

• 51% interest in Memphis 1 Pte. Ltd. sold to KDCR Singapore Sub-Trust 1.
• 0.51% interest in New Class B Notes issued by Memphis 1 also transferred.

The S\$6.6 million upfront payment reflects 51% of the adjusted net asset value of Memphis 1, calculated using the lower of (i) the agreed asset value plus land premium and (ii) the average of two independent valuations. The potential additional S\$1.8 million is contingent on a future lease extension, providing an uplift for Keppel if the asset continues to generate income.

The independent valuations were performed by Knight Frank Pte Ltd and Savills Valuation and Professional Services (S) Pte Ltd, using capitalisation and discounted cash flow methods, with assessed values of S\$1,047.0 million and S\$1,064.0 million respectively.

Is This News Price-Moving?

Potentially. While the transaction itself is not deemed material for FY2025, it signals the completion of Keppel’s exit from these data centre assets, consistent with its strategic pivot towards asset recycling and capital efficiency. Investors bullish on Keppel’s asset-light transformation may view this as positive, especially if future redeployments are value-accretive. Conversely, those expecting continued data centre exposure may reassess their investment thesis.

Conclusion

Keppel Ltd. has successfully completed its divestment of remaining interests in two major Singapore data centres, receiving up to S\$8.4 million and marking a strategic milestone in its capital recycling journey. While not immediately impactful on FY2025 financials, this move reinforces Keppel’s asset-light direction and disciplined approach to value realisation.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Shareholders and retail investors are encouraged to conduct their own due diligence or consult with professional advisors before making investment decisions. The author has no position in Keppel Ltd. at the time of writing.

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