Taking a basic view: Is Keppel T&T Offer price of $1.91 a fair deal?

Keppel T&T has been a subject of takeover at the price of $1.91 by Keppel Corp. The announcement was made on 27 September and lets take a look to try to assess if the deal is fair.

Psychological Valuation

From a psychological point of view, the offer price seems to be a win for anybody who has bought the shares since 10 October 2018 as the highest price ever since then would have been $1.88.


Economic Valuation

As of  30 July 2018, Keppel T&T had a net asset value of $1.54.

However, both its M1 investments (19.33%) and Keppel DC Reit ( 25.196%) are recorded at carrying amount. Had both been accounted for by market value,



Keppel DC Reit valued at $1.37 per share

Valuing M1 @ $1.63, We would add EPS $0.41 to the NAV which gives us $1.93
Valuing M1 @ $2.06, the takeover price ie, we will add EPS $0.54 to the NAV which gives us $2.08

Another valuation unknown part will be its strategic review of its China Assets. As of 31/12/17, the assets in China amounted to $233,359,000 (Page 119 of Keppel T&T 2017 Annual Report) or $ 0.41 of its assets. It is unsure if disposal gains or losses will amount from it.

Conclusion

Personally, I do think that should the M1 deal go through, the takeover price of $1.91 seems lackluster as the full market valuation of M1 at $2.06 is not flown through to minority holders of Keppel T&T. However, if the M1 deal does not go through, $1.91 would look like a much more attractive takeover offer.

However, the offer has been priced decently that most if not all shareholders since October 2008 would walk away with a smile knowing that they at least broke even while some would record good gains. The same however cannot be said for M1 Shareholders.