Keppel’s purchase of European asset manager Aermont to bring growth benefits: Analysts
Summary
SINGAPORE - Keppel Corps purchase of a 50 per cent stake in leading European asset manager Aermont Capital is a strategically savvy move that will catapult the Singapore company to the higher ranks within the league of global asset managers.That seems to be the emerging view of some analysts following the mainboard-listed companys announcement that it had sealed the deal to buy the stake for up to 356.85 million (S$520 million), and would pick up the remaining 50 per cent by 2028.We are positive on the acquisition, which leapfrogs Keppels asset management capabilities and geographical reach, wrote Mr Foo Zhiwei of Macquarie Equity Research. Accretion appears small at the onset, but can be as much as $94 million by 2030 as FUM (funds under management) is fully deployed and scales.Mr Foo has an outperform call on Keppel, with a 12-month price target at $7.88.The stock closed at $6.85 on Dec 1.UOB Kay Hian was even more upbeat.Keppels acquisition of top-ranked Aermont Capital, which has a major European real estate presence, arguably puts the company into the league of global asset managers, wrote analyst Adrian Loh. How the combined entity takes advantage of the macro and real estate issues in Europe over the next five years will be worth watching.The investment house has a buy call on the stock with a target price of $9.09 an almost 33 per cent upside to its closing price on Dec 1.Announcing the deal which will be funded by cash and treasury shares on Nov 29, Keppel said Aermont would bolster the Singapore companys recurring income and FUM, the latter of which is projected to grow by $24 billion to over $77 billion from the current $53 billion.On a pro forma basis, had the acquisition been effective on Jan 1, 2022, earnings per share for Keppel would have been 52.4 cents versus the 52.1 cents actually achieved. Recurring income would have risen to $512 million versus $503 million, while net tangible assets per share would have increased to $5.50 from $5.49.Keppel added that the acquisition would have minimal gearing impact on a pro forma basis.Aermont, which has a 16-year track record and enjoyed a gross internal rate of return of 25 per cent, is one of the largest owners of real estate in Europe, operating in 10 cities across the continent.Its investments include assets and businesses in the office, student accommodation, workforce housing, luxury hospitality and production studio infrastructure sectors.Aermont is ranked the highest among Europe-based real estate firms in terms of funds raised in the last five years.We view the deal as highly strategic, the Macquarie report added. Price tag aside, it is an acquisition of 1) talent, 2) capabilities, 3) geographic presence, 4) clientele access, and 5) a top mid-sized asset manager in Europe.
Funding
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