Keppel, SPH merger a good deal for both: UOB Kay Hian

Keppel is set to fully acquire SPH’s non-media businesses by end-December if shareholders approve.

Keppel’s proposed acquisition of SPH, excluding the latter’s media business, would benefit both companies, according to a brokerage report from UOB Kay Hian.

“In our view, Keppel’s proposed acquisition of SPH is a good deal for its shareholders as it gives the company exposure to assets that it currently does not have, especially the Purpose Built Student Accommodation, whilst expanding its foothold in its three key business segments – asset management, urban development, and connectivity. Asset management, in particular, could witness a 27% increase in assets under management to c.S$47b,” UOB Kay Hian Analyst Adrian Loh said for Keppel Corp.

UOB Kay Hian Analyst Lucas Teng added that SPH should accept Keppel’s offer.

“The offer price of S$2.099/share is approximately 5% above our previous target price of S$2, which appears to be fair. We think valuation could be slightly higher, but not by much,” Teng said.

He added that SPH’s student accommodation assets in the UK would be appealing to Keppel, as it is resilient to the effects of COVID-19 due to the rising domestic student population.

The acquisition would also avoid a scenario where SPH’s assets are cherry-picked, leaving the company with debt and the risk of monetising what is left.

The deal is set for completion by end-December, subject to the approval of shareholders.

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