Keppel T&T to benefit the most from M1 stake review

Its investment in M1 accounts for 38% of its market value.

Following the announcement that M1’s key shareholders – Keppel T&T, Axiata Group Bhd (Axiata), and SPH – are currently conducting a strategic review of their respective shareholdings, DBS Group Research said Keppel T&T has more to gain.

"Given that M1 is not a large proportion of the market caps of SPH and Axiata, the disposal of their stakes in M1 may not have a major impact on their valuations. In contrast, Keppel T&T will see the biggest impact as its investment in M1 accounts for 38% of its market value," explained DBS.

It estimates that every 10% upside to M1’s share price could lift Keppel T&T’s value by 3.8%. Further, DBS believes a sale of Keppel T&T’s stake in M1 will also lead to renewed expectations of privatisation by parent Keppel Corp.

Here's more from DBS:

Based on data of previous buyouts and privatisations for SGX-listed companies, we believe the takeover premium could range anywhere between 10-35% over last close, which implies the transaction price, if any, could range between S$2.23 to S$2.74 per share.

Given M1’s current market cap of around S$2b, any third-party acquirer would thus require around S$1.3-1.6b for the 61% stake held by the three existing major shareholders.

Of course, such a move will also lead to a General Offer (GO) for minority shareholders, but if the acquirer intends to keep M1 listed, it may not be incentivised to offer a premium to minority shareholders during a GO.