Keppel Remains Undervalued Following Completion of the Merger of Keppel O&M With Sembcorp Marine

We cut Keppel’s fair value estimate to SGD 7.00 from SGD 9.40 following the distribution in specie of the Sembcorp Marine, or Sembmarine, shares to its shareholders. Keppel still retains about a 5% stake in Sembmarine, but it is held under a separate entity for the purposes of funding potential contingent liabilities arising from the merger of Keppel offshore and marine, or Keppel O&M, with Sembmarine. We estimate Keppel will recognize more than SGD 3 billion disposal gain from the merger. We believe Keppel is undervalued now, underpinned by its diversified business while its Vision 2030 strategy will continue to unlock the value of its assets.