What Does Keppel Corporation Limited's (SGX:BN4) Share Price Indicate?

MR_Wu
2022-05-05

While Keppel Corporation Limited (SGX:BN4) might not be the most widely known stock at the moment, it received a lot of attention from a substantial price increase on the SGX over the last few months. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. But what if there is still an opportunity to buy? Let’s take a look at Keppel’s outlook and value based on the most recent financial data to see if the opportunity still exists.

Is Keppel still cheap?

Keppel appears to be overvalued by 21% at the moment, based on my discounted cash flow valuation. The stock is currently priced at S$6.86 on the market compared to my intrinsic value of SGD5.66. Not the best news for investors looking to buy! Another thing to keep in mind is that Keppel’s share price is quite stable relative to the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.

What does the future of Keppel look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a negative profit growth of -11% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Keppel. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? If you believe BN4 should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the risk from a negative growth outlook, this could be the right time to reduce your total portfolio risk. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on BN4 for some time, now may not be the best time to enter into the stock. Its price has risen beyond its true value, on top of a negative future outlook. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Should the price fall in the future, will you be well-informed enough to buy?

$KEPPEL CORPORATION LIMITED(BN4.SI)$

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

  • yeo
    2022-05-05
    yeo
    Resistance at $7. Once broken we shall see it heading upwards with $7.30 next resistance level.
  • 75th
    2022-05-05
    75th
  • LawrenceSG
    2022-05-14
    LawrenceSG

    Take note. Not time yet. 

  • SmallYang
    2022-05-09
    SmallYang
    Hopefully BN4 rises. Stock has been on the low side for some time.
  • Kyesu
    2022-05-09
    Kyesu
    Read and thanks
  • Epee
    2022-05-06
    Epee
    Thanks for sharing!
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