Keppel Corp

Keppel Corp: may face a bigger conglomerate discount, says Credit Suisse, though the house thinks the counter-cyclical investment may stand to benefit KEP in the longer term and offset risks in O&M. Morgan Stanley is concerned about weak property market and expensive inventory from KPLD as well as larger potential discount shareholders will attribute to KEP, property conglomerates being the most discounted (~33% to RNAV) sector. The privatization seems almost counter-intuitive, as most conglomerates spin-off their property segment to unlock value. Also, KEP’s and KPLD’s discount to NAV and liquidity do not seem to justify privatization. JPM also applies a conglomerate discount and foresees a shareholder shake-up (as KEP’s current shareholders are mostly O&M focused), but sees the privatization as potentially offsetting the emerging headwinds for O&M. Latest broker ratings: Credit Suisse reiterates Outperform with TP lowered to $10.00 (from $12.50) Morgan Stanley reiterates Equal-Weight with TP lowered to $7.80 (from $9.60) JPMorgan reiterates Neutral with TP at $8.80.