On Wednesday, Morgan Stanley upgraded shares of Keppel (OTC:KPELY) Corp. (KEP:SP) (OTC: KPELY) from Equalweight to Overweight, adjusting the price target upward to SGD8.18 from the previous SGD6.15. The firm's analysis indicates that Keppel Corp. is on a positive trajectory, with an ongoing return on equity (ROE) repair cycle, which could lead to dividends and asset monetization that may exceed market expectations.
Keppel Corp.'s balance sheet has seen a reduction in size since the Covid-19 pandemic, shrinking by 15%, with 40% of this reduction being distributed as dividends to shareholders.
"Keppel 's S$27bn balance sheet size is still similar in size to 2018, though it has shrunk 15% since Covid, with 40% of the shrinkage paid out as dividends. Electricity markets are turning the corner," said the analyst.
The company's exposure to the Chinese property market, which accounts for 36-43% of its Gross Floor Area (GFA) and landbank units, is acknowledged as a sustained drag but is believed to be already factored into the current stock price. Morgan Stanley suggests that the changing rates cycle and the maturation of new projects could hasten the process of monetization for Keppel Corp.
Furthermore, the investment firm points out that a reduction in capital expenditure intensity could pave the way for Keppel Corp. to more easily return capital to its shareholders. This potential for increased capital return aligns with the company's strategic moves and market conditions that are turning favorable for the energy and infrastructure company.
InvestingPro Insights
Keppel Corp (OTC: KPELY) has been a beacon of stability for investors, with the stock generally trading with low price volatility. This characteristic may provide a sense of security for investors who value consistency in their portfolio. InvestingPro data further reveals that Keppel Corp holds a market capitalization of 9370M USD, with a notably low P/E ratio of 3.14, indicating that the stock could be undervalued compared to its earnings.
The company's financial health appears robust, with a gross profit margin of 28.15% over the last twelve months as of Q1 2023. This suggests that Keppel Corp has been effective in managing its cost of goods sold and maintaining profitability. Additionally, investors might find comfort in knowing that Keppel Corp has maintained dividend payments for 33 consecutive years, with a high dividend yield of 9.54%, as of the latest data. This consistent dividend payment history underscores the company's commitment to rewarding its shareholders and could be a compelling reason for income-focused investors to consider Keppel Corp.
Among the InvestingPro Tips for Keppel Corp, it's noted that analysts are optimistic about the company's profitability in the upcoming year. This aligns with Morgan Stanley's positive outlook on the company's future performance. Moreover, Keppel Corp has delivered a strong return over the last three months, with a price total return of 18.27%, reflecting investor confidence and market momentum.
For those seeking additional insights and tips, InvestingPro provides further analysis on Keppel Corp, with a total of 9 InvestingPro Tips available, which could guide investors in making a well-informed decision. To access these tips and more in-depth analysis, consider subscribing to InvestingPro using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.