• Yesterday, Keppel shares $Keppel(BN4.SI)$ fell as much as 5% intraday to $10.16 – its lowest level in 21 weeks following the pre-market announcement that IMDA had suspended review of the M1-Simba merger
• While the stock eventually clawed back some of its losses to close 2.1% lower at $10.38, Keppel is down 23.3% over the last three months from its record high of $13.13 on 25 Feb this year.
• On the back of this pullback from its Feb record, the company has been actively buying back shares, repurchasing 200,000 shares (over S$2 million) on both 7 and 13 May, according to MT Newswires
• Macquarie Research (MQ) released a report yesterday with their thoughts on Keppel’s share price on the back of the collapse of the M1 divestment deal
• Read more for the full article as well as important disclaimers:
What’s new
Keppel Ltd (KEP) announced on 18 May 2026 that IMDA has suspended review of the M1-SIMBA merger. A briefing for media and analysts was held at 10am.
Why it matters
Share purchase agreement (SPA) to lapse on long-stop date. On the call, KEP expressed their intention to let the SPA lapse when it reaches the long-stop date of 21 May 2026. This compares against SIMBA's statement, which suggests that discussions are ongoing. MQ views the SPA deal to effectively be "terminated
M1 retained with majority ownership under non-core portfolio for divestment. New Keppel will not be affected by M1 following this development. KEP has activated plans to optimise costs within the business to improve its run-rate EBITDA and re-position the company higher valuations. MQ understands from KEP that the right-sizing includes streamlining of staff costs and platform / licensing costs. M1's capex requirements are also lower since it has already rolled out the 5G network in its JV.
Other financial effects: No fees are payable by both parties from a termination. The S$222m accounting loss which KEP recognised in its 2H25 results was due to impairment of goodwill and cannot be reversed.
Bringing forward other divestments to plug the gap. KEP stated that they intend to accelerate divestment plans in its pipeline to fill the gap from M1. They expect this to come from assets in the RigCo, or the Real Estate segment. Divestment target of S$2-3 billion in non-core assets in 2026 remains unchanged, alongside the special dividend policy of 10-15% of gross proceeds completed within the year.
Not precluded to seek other buyers for M1. A termination of the SPA does not preclude KEP from finding new buyers for M1 immediately after. KEP can restart discussions with previous interested parties in the lead-up to SIMBA's offer.
What now
MQ expects shares to pull back by the amount of expected special dividend (7-11 S cents) on this news. Assuming KEP can plug the gap on M1, MQ thinks shares are attractive as dividend yield starts to trend towards the 5% handle.
MQ has an Outperform rating on KEP with a 12-month target price of $13.16 based on a Sum-of-Parts stock methodology.
Note:
Macquarie Research is independent from the Warrants business, what the Macquarie Warrants desks quote from Macquarie Research may not reflect the complete analysis of Macquarie Research on the relevant company over time.
---------------------------------
Macquarie has a trending Keppel call warrant $KeppelMBeCW261015(KZDW.SI)$ which costs $0.033 while Keppel shares trade at $10.38. The warrant will move in the same direction as Keppel shares but at approximately 6.7 times more, based on its effective gearing level of 6.7x as of 9AM today. Click on the warrant live matrix to see how it moves alongside Keppel shares: https://warrants.com.sg/tools/livematrix/KZDW
The warrant can be traded on an investor’s brokerage account just like shares, and does not come with margin calls. Those bullish on Keppel shares in the short-term may therefore wish to consider using call warrant KZDW instead. There is no put warrant available over Keppel.
Comments