Keppel’s Q3 Business Update In Line; Positive Development on Proposed Deal With Sembcorp Marine

We raise fair value estimates of Keppel and Sembcorp Marine, or Sembmarine, to SGD 9.40 (from SGD 7.30) and SGD 0.12 (from SGD 0.10), respectively, after incorporating the stronger order wins and the latest development on the proposed offshore and marine, or O&M, transactions. There was no major surprise in Keppel’s third-quarter 2022 business update, which did not provide detailed earnings numbers. Cumulative nine-month revenue was up 24% year on year, within our expectation, while net profit improved year on year with stronger performance from the energy and environment and asset management segments. Meanwhile, we think the revised terms on the proposed combination of Keppel O&M, or KOM, and Sembmarine have improved the deal certainty and we expect it to be approved by respective shareholders. Hence, we raised Keppel’s fair value estimate to factor in its eventual 54% stake in Sembmarine, and think the shares are attractive currently. We believe Sembmarine is fairly valued now following the more than 50% share price run-up year to date.