Keppel’s acquisition of Aermont to deliver growth and diversification benefits: analysts
Michelle Zhu
MACQUARIE Equity Research and UOB Kay Hian (UOBKH) are positive on Keppel ’s proposed acquisition of European real estate manager Aermont Capital for up to 931.9 million euros (S$1.4 billion).
In their respective reports issued on Thursday (Nov 30), both research houses characterised the deal as one that would significantly boost the group’s funds under management (FUM), and drive the group’s overall growth.
Macquarie continued to rate Keppel at “outperform” with a price target of S$7.88; UOBKH maintained its “buy” call on the stock with a S$9.09 target.
Macquarie analyst Foo Zhiwei said the acquisition, which he views as highly strategic, leapfrogs Keppel’s asset manager capabilities by years.
“Price tag aside, it is an acquisition of talent, capabilities, geographic presence, clientele access, and a top mid-sized asset manager in Europe.”
In his view, this justifies the stock’s implied valuation of 13 times enterprise value over Ebitda (earnings before interest, taxes, depreciation and amortisation), which is “already attractive” relative to Keppel’s peers.
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However, Foo cautioned that the deal’s accretion would require patience from investors.
This is because such accretion may “appear small at the onset”, but could grow to S$94 million by end-2030 if Aermont’s FUM is fully deployed, and scale from the current S$24 billion to an estimated S$60 billion.
As Aermont is a 100 per cent fee-income business, Foo believes the estimated S$9 million profit after tax and minority interests contribution from Keppel’s 50 per cent-stake in Aermont would understate the real estate manager’s potential contribution if its FUM is fully deployed.
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He added that he sees an earnings upside for Keppel if it co-invests in new funds co-created with Aermont.
“At the base case, we think the deal adds at least 8 per cent to fair value.”
Likewise, UOBKH analyst Adrian Loh said the deal represents a “major step” for Keppel towards its target of increasing overall FUM to S$100 billion.
“The asset-light, fee-related earnings acquisition of Aermont arguably positions Keppel as a global asset manager with a real-estate focus.”
He added that Aermont’s growth profile for the next five years to 2028 – when Keppel buys the other half of the asset manager – would be “interesting to watch, given the macro and real-estate environment in Europe”.
Loh further noted that the deal would expand Keppel’s network of blue-chip limited partners (LPs), with eight of Aermont’s 15-largest LPs being new to Keppel.
“Clearly, given the longevity of Aermont’s track record, this deal also adds a number of senior fund managers to the company.”
At Keppel’s current share price levels, the stock trades at a price-to-earnings multiple of 11.9 times based on UOBKH’s estimates for FY2024, and at a price-to-book ratio of 0.9 times.
These valuations are “far from being egregious”, said Loh, considering Keppel’s more stable earnings stream after divesting its offshore marine business.
Shares of Keppel were up S$0.10, or 1.5 per cent, at S$6.77 as at the midday trading break on Friday.
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