Can Keppel share price meet the great expectations of Temasek Holdings?

It is that sinking feeling all over again for Keppel share price. And it appears to me that investors are not convinced of a turnaround of Keppel share price. Following the release of a strong full-year 2018 financial result on 24 January 2019, Keppel share price keeps falling instead of rising. Management must be rubbing their eyes and wondering what on earth could have happened to Keppel share price.

With a stake amounting to 20.54%, Temasek Holdings is currently the largest shareholder of Keppel. The burning question among investors must be: how would Temasek Holdings fight its way out with Keppel? Should Temasek Holdings go for a “big bang” merger between Keppel and Sembcorp Marine to revive the ailing Keppel share price or continue to let Keppel share price spiral out of control? An overhaul in the corporate identity of Keppel may not be a bad thing considering the corruption scandal of FY2017 could have somewhat dented the reputation of the world leading oil rig builder.

Keppel share price

But then again, it is not all doom and gloom for Keppel share price as the company struck gold with its golden goose – Keppel Land, which recorded a net profit of $938 million for 2018, up 44% from S$650 million a year ago. In fact, this business unit should be a major catalyst for Keppel share price from 2019 to 2021.

Keppel share price in hibernation

2018 had been a bizarre year for the oil rig builder as Keppel share price suffered an unexpected meltdown, falling from a high of $8.70 in February to a low of $5.85 in December 2018. The sluggish Keppel share price came on the back of a recovering global crude oil. While oil price had not recovered to the USD100 per barrel in the boom days, the average price was still above the cut-throat level of USD28 per barrel seen in early 2016. Against this backdrop, it seems that oil prices would continue to be volatile, but the O&M sector should be on a slow road to recovery.

According to data from the Baker Hughes, the average number of rigs in worldwide peaked at 3578 in 2014. However, since the start of the oil slump, the number had collapsed to 1400 in 2016. By the end of 2018, the average number of rigs stood at 2211. Based on the data, the demand for new oil rigs is expected to be soft moving forward but is gradually picking up.

Given the current Keppel share price of $6.04, this counter is trading at Price/Book Value of 0.971. Though Keppel share price is trading below its book value, investors should be wary of walking into a potential value trap. In early 2018, investors had bought into the perceived recovery of Keppel share price but were subsequently caught off-guarded by the plunge in share price.

Indeed, the only predictability of Keppel share price is its [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

Username
Password

» Lost your Password?

Not a member yet? You may sign up to become a member of SG Wealth Builder. The full benefits and privileges of SG Wealth Builder Membership:

  1. Access to the latest premium articles of SG Wealth Builder
  2. Email notifications of latest blog articles
  3. Bonus investment report on SGX stocks
  4. Access to Wealth Forum for investment ideas and discussion
  5. Request for coverage on stocks, insurance and other personal financial topics
  6. Comment in articles and Wealth Forum
  7. Future network opportunities

SG Wealth Builder Lifetime Membership

To celebrate the coming joyous Chinese New Year, there is a special promotion offer for SG Wealth Builder Lifetime Membership.

For an one-off payment of $200, you can get full access to all the articles and enjoy the benefits of SG Wealth Builder Membership. There is no recurring monthly charges and is only available for limited time.

Hurry! Sign up by clicking the Paypal button below:

Updated: February 8, 2019 — 3:20 pm

3 Comments

Add a Comment
  1. Hi Gerald

    Is IXOM takeover good or bad for KIT? Appreciate your comments please.

    Thanks and best regards.

    Chee Tsing

  2. Hi Mr Lim,

    I actually don’t view the takeover favorably as KIT is a bit over-leveraged at the moment. In order to fund this acquisition, a cash call (rights issue) is inevitable. Thus, in the short-term, the unit price is likely to face pressure.

    Regards,
    Gerald
    https://sgwealthbuilder.com

  3. Thanks, Gerald, for the prompt reply.

Leave a Reply