After Keppel flagged potential transactions involving M1 and Keppel Telecommunications & Transportation, CGS-CIMB pointed to the potential for privatizations, stake divestments and general offers.
Keppel Corp. said on Monday that it was “concurrently” considering deals involving its stakes in Singapore telco M1 and Keppel Telecommunications & Transportation, both of which could lead to transactions in the shares. Keppel T&T, which is 79 percent owned by Keppel, owns a 19.2 percent of M1.
Singapore Press Holdings said on Monday that it was approached by Keppel to participate in a possible transaction involving the 13.45 percent stake in M1, which is held via wholly owned subsidiary SPH Multimedia.
Interest in M1?
“We think there could be third-party interest in the M1 stake given its share price weakness,” CGS-CIMB said in a note on Monday. It noted that for Keppel T&T, the current value of M1 is at S$0.52 a share, representing around 38 percent of its market cap.
It noted that in March of 2017, Axiata, Keppel and SPH undertook a strategic review of their M1 stakes, which concluded in July 2017.
“We think Axiata could be an interested buyer should M1’s share price turn attractive,” the note said.
If a buyer emerges for Keppel’s and SPH’s combined around 32.6 percent stake in M1, that could trigger a mandatory general offer, CGS-CIMB said, adding it could be positive for the telco’s share price.
Keppel T&T privatization?
When it comes to Keppel’s stake in Keppel T&T, “we think a deal could go both ways – a privatization that will cost the group around S$150 million or a partial divestment to strategic partners,” CGS-CIMB added. “Both make sense to grow the data center, e-commerce and logistics businesses, although the use of a lead-up announcement lowers the chance of a direct buyout.”
For SPH, its M1 stake forms a major component of its equities investment, which is around 40 percent of the media company’s S$1.1 billion investible fund, the note said.
“If there is a successful divestment of the M1 stake at the current share price of S$1.63, we think SPH could receive proceeds of S$203 million, which accounts for about S$0.13/share,” CGS-CIMB estimated.
“We believe SPH could retain the bulk of proceeds to fund its new investment strategy of overseas property asset management while a small portion could be paid out as special dividends,” it added, saying that would be in addition to its estimated 5.5 percent dividend yield on the stock currently.
It kept Keppel Corp. at Add, with a S$8.82 target price, and it kept M1 at Hold with a S$1.50 target price. It rates SPH at Add with a S$2.88 target price.
Shares of M1 and Keppel T&T remained halted on Monday. Shares of Keppel Corp. ended down 0.43 percent at S$7.00, while SPH was off 0.71 percent at S$2.80.