Monday, 10 August 2020

Did The Father (Temasek) Abandon the Son (Keppel)?


Source: www.kepcorp.com


Singapore's Temasek Holdings is terminating its S$4.1 billion conditional offer for conglomerate Keppel Corp by invoking a material adverse change (MAC) clause following the company's poor financial results.
  
Refer also to my earlier post below, where I wrongly predicted that Temasek will still put up the offer amid a lower price than the initial SGD7.35 a share.



SO WHY?

Did the Father (Temasek) give up on the Son (Keppel)?

I don’t think so. No Father will give up on his children. 

The news of the partial for Keppel was made last year prior to the unexpected Covid-19 crisis. Temasek and Singapore will never have expected that SIA and Singapore economy will require more than S$100 Billion stimulus in 2020, back then, when Temasek made the offer for Keppel in 2019.

Besides, the Father has many children. He has to prioritise to save another son, Sembcorp Marine. 

The deal from Sembcorp Industries (SCI) to Sembcorp Marine (SCM) is definitely the more urgent one than the one from Keppel, as SCM is struggling with Debt crunch.

Furthermore, Temasek only need to fork out SGD 600 Million for SCM unlike Keppel’s offer of SGD 4 Billion.

Below are my earlier articles on SCM and SCI. 

To Merge Sembcorp Marine and Keppel O&M is NOT up to Temasek and Shareholders alone? Anti-competition Authorities may REJECT!


Unlike SCM, Keppel still have a strong balance sheet. 
See below, Balance Sheet of Keppel extracted from its latest financial report.

As reported recently, Keppel still have cash balances of SGD 2.4 Billion, with a net current assets of SGD 1 Billion.

On the contrary, SCM is struggling with a negative net current assets of SGD 260 Million, that includes an overdue SGD 2 Billion debt to be repaid to SCI.

At the same time, Keppel also have many other businesses such as property, infrastructure, and data centre etc to keep Keppel O&M afloat for the time being. In any case, Keppel O&M already wrote off close to SGD 1 Billion in the latest quarter of financial reporting. Hence, 3Q or 2H 2020 results should be much better! (I guess).

Therefore, the Father probably decide to postpone the “helping hand” for his “Kep-Son” to a later time, and instead concentrate his effort to save “Semb-son”, who is more sick and in ICU now.

Also, the Father does not want the world to blame him on “anyhow squander the country’s money” to save his son, in a time, where he has already made record spending, and yet only win 60% of the country’s votes.

Instead, it is better now to let the world also see that the Father wanted to teach his son “how to fish” rather than just “giving him the fish”. Not sure if this Father is as wise? We shall see... 





Lastly, it is interesting to see what will happen to Keppel’s share price when stock market opens tomorrow.

Ooops….. I am vested in Keppel at SGD 5.15! Aiyoh.... wrong call earlier.... Haha! 





10 comments:

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    1. Hi SI, haha. Typo error, I am 5.15. 5.16 is you, so I mistakenly typed in. One cent cheaper than you... same same!

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  3. Hi Rolf,

    I did a quick calculation on it's NAV per share based on its recent report, it's around $5.95.

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      Thanks for the encouragement. Keppel drop 11% yesterday and yes, it’s way below NAV.

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