“At our 1Q2026 business update, we announced our target to monetise $2 billion to $3 billion of non-core assets in 2026. This remains unchanged, and we will continue to work towards our monetisation target. In real terms, for our investors, the impact is about 7 cents to 11 cents per share in special dividends. We will continue to explore opportunities for monetisation, so the special dividends have not gone away; they have just been deferred,” he adds.
The special dividends are at the discretion of the Keppel board, but in FY2025, Keppel announced it would pay out 10 to 15% of the monetisation received or realised in that year. To date, Loh says Keppel has completed monetisations that range from $300 million to $400 million this year.
Seeking divestment of other assets
Loh says Keppel will look to divest other non-core assets. “The market conditions for offshore rigs have improved,” he adds. Keppel still owns about six jack-ups, all of which are already completed, out of a total of 13 rigs. The seven other rigs are at various stages of completion. The offshore assets are valued at $3.5 billion to $4 billion.
“We are also working on some potential real estate monetisation, so between these and the rigs, we believe that we should be on target to hit $2 billion to 3 billion of monetisation for this year. For real estate, specifically, it includes Keppel South Central and also Keppel Plot Six. Plot six will be launched sometime in the middle of the year. Keppel South Central’s leasing is improving, and we believe that at some point, when the leasing has reached a certain level, which we hope will be sometime this year, we will look at the monetisation,” Loh elaborates.
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Part of FY2026’s ordinary dividend will comprise earnings from the sale of Keppel Merlimau Cogen to Keppel Infrastructure Trust for $128 million, as Loh says any payout from the sale will be part of ordinary dividends. Keppel’s FY2025 ordinary dividends comprised 15 cents interim dividend and 19 cents final dividend. In addition, Keppel Sakra Cogen will be commissioned in the middle of this year, Loh says.
OCBC Credit Research says its base case assumes that disposals and operating cash flow will continue to be sufficient to fund new acquisitions and investments. “If the deal to consolidate M1 and Simba lapses, the industry will be back to a four-player Mobile Network Operator (MNO) market, and price wars could intensify again,” OCBC Credit Research suggests.
According to Loh, for the M1 transaction, there were serious discussions involving at least two bidders. “We understand that Starhub was previously interested in acquiring M1. If Starhub acquires M1, we think its credit metrics could be strained if the deal were funded with debt. However, a longer-term consolidation in the market should return pricing to a more rational level, which should restore margins and protect longer-term profitability,” OCBC Credit Research adds.
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Following news of the deal falling through, Lim Siew Khee and Meghana Kande of CGS International have downgraded Keppel from “add” to “hold”, as they view this development as a brake on the company’s divestment moves and potentially lower dividend payouts. From a previous target price of $13.52, they have cut it to $11.50.
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, comprising a normal dividend of 28 cents and a special dividend of 16 cents, on the back of $2 billion in asset monetisation and a 15% payout on the special dividend portion.
UOB Kay Hian maintains a ‘buy’
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 the UOBKH analyst, who has kept his “buy” call and $13.23 price target.
He believes that the “New Keppel” remains the earnings engine, with 1QFY2026 asset management fees up 13% y-o-y to $108 million.
Further potential upside will come from $2 billion in limited partnership commitments being finalised, a $36 billion deal pipeline, and the Sakra hydrogen-ready cogeneration plant ramping up in the second half of 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 the UOBKH analyst.
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With the sale that fell through and $1 billion in proceeds, Keppel will now seek to advance other divestments to maintain its monetisation target.
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 Adrian.
Meanwhile, he 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.
Adrian is keeping his estimates for now, assuming a FY2026 dividend of 34.2 cents based on a 65% payout ratio, with a target price of $13.23 is based on 18 times 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,” he adds.
Keppel’s share price has fallen 5% since the M1 announcement on May 18 and has lost all the gains it made since the start of the year, down 0.11% year-to-date.
