Keppel tumbles over 26% as stock trades ex-distribution for Sembmarine shares

SINGAPORE – Keppel Corp shares lost more than a quarter of their market value on Thursday after the stock began trading ex-distribution for Sembcorp Marine (Sembmarine) shares.

Starting at 9am on Thursday, those who buy Keppel shares are no longer entitled to the distribution in specie of 19.1 Sembmarine shares for every Keppel share held. The stock is still cum dividend of 18 cents.

After diving to $5.13 in early trading, Keppel shares ended the day at $5.40, down $1.94 or 26.4 per cent from its overnight close of $7.34.

But based on adjustments for the distribution, Keppel’s market value actually rose on Thursday.

This is because if one were to discount the value of the 19,100 Sembmarine shares at Wednesday’s closing price of 13.4 cents, Keppel’s closing share price of $5.40 is still about 13 per cent above its adjusted-for-distribution price of $4.78 on Wednesday.

Meanwhile,

Sembmarine stock drifted down

as well, closing the day 0.6 cent or 4.5 per cent lower at 12.8 cents.

The merger of Keppel Offshore & Marine (Keppel O&M) with Sembmarine will see Keppel receive 54 per cent or 36.8 billion Sembmarine shares with a total implied value of about $4.5 billion.

Keppel will distribute in specie 49 per cent of these shares, or approximately 19.1 Sembmarine shares for every Keppel share held, to its stockholders.

This exercise has an implied value of approximately $4.1 billion.

In a statement issued on Wednesday night, Keppel reassured shareholders that the dilution from the difference between the $3.4 billion in gain and $4.1 billion in distribution would be a minimal 28 cents a share to Keppel’s net tangible asset.

Brokers said the sell-down was by holders of Keppel stock who have qualified for the Sembmarine share entitlements.

So what next?

Given the fundamentals of Keppel, market insiders believe that the stock will recover over time.

“This is just opportunistic selling,” said the head of a brokerage dealing team. “But it also provides an opportunity for longer-term investors to pick up Keppel on the cheap, if you believe in the company’s fundamentals.”

In its statement on Wednesday evening, Keppel said the completion of the Keppel O&M transaction marked a big step forward in Keppel’s Vision 2030 strategy.

It added that the group was transforming into “a global asset manager and operator, with strong capabilities in energy and environment, urban development and connectivity”.