On May 18, regulator IMDA, which was reviewing this deal, announced it is instead investigating Simba for allegedly using frequency spectrum it was not assigned to - deemed a potential breach of law.
With the sale to Simba off, Keppel will now focus on improving efficiency at M1 via right-sizing, lower network costs and also product rationalisation.
Keppel, which was to have sold M1 to Simba for $1 billion, maintains that its FY2026 monetisation target of between $2 and $3 billion is intact.
Keppel remains open to divesting M1 but Lim and Kande figure the process will be delayed by one to two years.
For FY2025, while M1 divestment was still pending regulatory approval, Keppel declared a dividend per share of 47 cents, including a special dividend of 13 cents, which consists of 2 cents cash and 11 cents in Keppel REIT units. This payout was based on 15% of the $1.6 billion worth of assets Keppel monetised in FY2025.
With the latest development, Lim and Kande have "conservatively" cut their dividend assumptions for FY2026 from 48 cents to 45 cents, including a normal dividend of 28 cents and a special dividend of 16 cents, on the back of $2 billion asset monetisation and 15% payout for the special dividend portion.
Besides M1, other assets ready for sale include Keppel Bay plot 6, Keppel South Central and a portfolio of legacy oil rigs held under Rigco.
Upside risks include higher-than -expected monetisation and AUM growth in FY2026.
On the other hand, downside risks include slower-than-expected asset monetisation impacting dividend payout and weaker integrated power business.
On the other hand, Adrian Loh of UOB Kay Hian has stuck to his guns. "We see this as a sentiment overhang, not a fundamental re-rating," says Loh, who has kept his "buy" call and $13.23 price target.
Loh believes that the ‘New Keppel’ remains the earnings engine a 13% y-o-y growth in asset management fees in 1QFY2026 to $108 million.
Other potential upside will come from $2 billion in limited partnership commitments being finalised, a $36 billion deal pipeline, and the Sakra hydrogen-ready co-generation plant ramping up in the second half this year.
"We note that M1 stays classified as a non-core asset and available-for-sale, and that earnings will not be impacted by the deal deferral," says Loh.
With the sale that fell through, and $1 billion in proceeds along with it, Keppel will now try and bring forward other divestments as it aims to maintain the monetisation target.
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Furthermore, Keppel's share price dropped following the news. As such, Keppel may have grounds to consider legal options.
"Given Keppel’s fiduciary duty to minority shareholders, we believe that it should act once the IMDA investigation is concluded and the facts are established," says Loh.
Meanwhile, Loh points out that M1’s "saleability" is not in question. "The deal failed for reasons external to M1, the strategic rationale for industry consolidation remains intact, and the underlying asset is now being optimised ahead of a likely future divestment," he reasons.
Loh is keeping his estimates for now, assuming a FY2026 dividend of 34.2 cents based on a 65% payout ratio.
His target price of $13.23 is based on 18x earnings, which is a 25% discount to its global asset management peers that have a greater reach in scale and geography, deeper liquidity and longer track record.
"The M1 setback yesterday strips out a known and quantifiable catalyst. However, we point out that a stronger M1 offered into a market where consolidation logic remains compelling could potentially fetch equal or better terms than the $1.43 billion enterprise value originally agreed upon," says Loh.
Keppel shares closed at $10.38, down 2.38% for the day.
Tuas, the Australia-listed entity that owns Simba, plunged by 62.79% to A$2.27.
