Goldman Sachs Initiates Coverage on Keppel Corp (KEP:SP) with Buy Rating and SGD7.80 Price Target
In a recent development, Goldman Sachs has started covering Keppel Corp (KEP:SP) (OTC: KPELY) and has assigned a Buy rating to the company's stock with a price target of SGD7.80. The firm is optimistic about Keppel Corp's potential to benefit from the rising demand for electricity and the ongoing energy transition, which is expected to drive a 14% compound annual growth rate (CAGR) in the company's core profit after tax and minority interests (Patmi) over the next three years.
Goldman Sachs analysts believe that Keppel's infrastructure segment is well-positioned to take advantage of the expected increase in Singapore's electricity demand, which is projected to grow significantly in the coming years. This growth will be fueled by the expansion of data centers, advanced manufacturing, and the adoption of electric vehicles.
Additionally, Keppel's integrated power business is expected to expand its capacity by 50% by 2026, which will further contribute to the company's growth. The firm also anticipates an improvement in Keppel's return on equity (ROE), which is forecasted to rise from 7% in 2023 to an estimated 10% by 2026. This improvement in earnings visibility and ROE could lead to a re-rating of the company's multiples and align it with its peers in fund management and infrastructure.
Furthermore, Keppel's decarbonization and sustainability segment, which has higher margins, has seen a significant increase in long-term contracts over the past 1.5 years. These contracts are expected to start contributing to the company's earnings from 2024 onwards.
In conclusion, Goldman Sachs' positive outlook on Keppel Corp's potential to capitalize on structural shifts in energy demand, along with its strategic business expansion, has led to the initiation of coverage with a Buy rating. The company also offers an attractive expected dividend yield of 5.3% for 2025.
Analysis:
This article discusses Goldman Sachs' coverage initiation on Keppel Corp, highlighting the company's growth prospects in the energy sector and its strategic positioning to benefit from the evolving market dynamics. Investors can consider this information when making investment decisions, as it provides valuable insights into Keppel Corp's future potential and expected performance in the coming years.