Keppel Corp

Keppel Corp: owns a 20% stake in KrisEnergy, an independent upstream oil and gas company which holds interest in 15 licences in Cambodia, Indonesia, Thailand and Vietnam. When KEP acquired the stake for US$115m in Jul last year, it came with a call option for another 16% stake, exercisable no later than two years from the date of grant. If that option was exercised, the amount payable would have been US$120-150m. Yday, KEP announced that in view of a potential IPO of KrisEnergy, the parties have agreed to amend certain terms of the call option – mainly the exercise price. Subject to the IPO occurring by 15 Aug 2013 and an earn out mechanism, the max consideration for the exercise of the call option would be about US$122.7m. KEP also indicated it has agreed to be a cornerstone investor by subscribing for new shares in KrisEenrgy at the offering price for an aggregate subscription price of US$35m. This should boost KEP’s stake in KrisEnergy to marginally above 30%. The approx 10% stake may cost a total of about US$158m Detusche estimates a potential theoretical paper gain of about US$200m for KEP’s initial 20% stake. It expects KEP to remain a major shareholder of KrisEnergy post listing, but does not rule out the possibility of KEP recognizing some gains in future if the price is acceptable. Keeps its Buy call and TP $13.