Kep Corp : Bought @ $5.36 for Round 97

Read? Kep Corp : Bought @ $5.67 for Round 96


SINGAPORE (REUTERS)- Temasek Holding's $4.1 billion bid to acquire a controlling stake in Keppel Corp will be under scrutiny on Thursday as a big quarterly profit drop at the conglomerate could raise the risk of the state investor dropping its proposal, analysts said.

Keppel last week warned that material impairments relating to its offshore and marine segment (O&M) would hurt profits, which analysts say could breach so-called material adverse change (MAC) clauses of Temasek's offer.

Analysts said the impairments would typically affect net asset value and net profit after tax, thresholds for which have been set as pre-conditions to an offer.

MAC clauses can be invoked to end or renegotiate deals, particularly if events occur that are detrimental to the target company.

To meet the threshold, Keppel would need to report $170-230 million in second-quarter core profits, excluding one-off items, assuming impairments of up to $150 million relating to its O&M business, Citigroup analysts estimate.

Still, the deal has a long-stop date of Oct 21, meaning Keppel could make up any shortfall in its third-quarter results, while Temasek also has the right to waive its pre-conditions.

Refinitiv data shows that Temasek owns about 21 per cent of Keppel.

Last October, Temasek offered to buy control, leading to expectations of consolidation in the domestic rig building sector that has been battered in recent years due to low oil prices.

Those expectations were further boosted this June when Temasek stepped in to support a $2.1 billion rights issue by Sembcorp Marine, Keppel's smaller competitor.

Keppel reported first-quarter net profit of S$160 million, down 21 per cent from a year ago. At that time, it said it had not breached the MAC clauses.

Keppel shares have fallen 16 per cent this year to trade at $5.68, close to the level they were languishing at when Temasek made its conditional bid of $7.35 per share.


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KEPPEL Corp posted a net loss of S$697.6 million for the second quarter ended June, reversing a S$153.1 million net profit a year ago. The company was hit by S$919 million in provisions for Keppel Offshore & Marine’s contract assets, doubtful debt, as well as share of impairment provision arising from its associate, Floatel.

Without the impairments, Keppel would have seen a net profit of S$222 million for Q2, up 45 per cent from a year ago. The company’s revenue for Q2 was S$1.33 billion, down 25.7 per cent from a year ago. Contributions fell across all business divisions due measures to contain the spread of Covid-19.

Keppel declared an interim dividend of 3.0 cents per share, down from the 8.0-cent dividend it had declared for the same period a year ago. The interim dividend will paid on Aug 20.

For H1 FY2020, Keppel’s net loss amounted to S$537 million, hit by S$930 million of impairments from the Offshore & Marine (O&M) division. Excluding the impairments, it would have registered a net profit of S$393 million for H1, 5 per cent higher than a year ago.


Revenue for H1 stood at S$3.18 billion, down 4 per cent from a year ago. This was mainly due to lower contributions from property trading projects in China, power and gas sales, environmental engineering projects and asset management.