SINGAPORE - Keppel Corp’s 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 company’s 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 Keppel’s asset management capabilities and geographical reach,” wrote Mr Foo Zhiwei of Macquarie Equity Research. “The deal is highly strategic. 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.

“Keppel’s 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. “This acquisition will deliver growth as well as investor and geographic diversification. 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 company’s 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. The acquisition leapfrogs Keppel’s asset manager capabilities by years. We think this justifies the implied valuation of 13x EV/Ebitda, which is already attractive v peers.”

EV/Ebitda is a measure of enterprise value, or the company’s total value, against earnings before interest, taxes, depreciation and amortisation.

Meanwhile, UOB Kay Hian noted that apart from launching Keppel into the European real estate space, the deal also expands the company’s network of blue-chip institutional investors or limited partners, with eight of Aermont’s 15 largest limited partners 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,” the research house added.

Macquarie sees Keppel re-rating as it transforms into a global alternative asset manager.

“As recurring fee income grows alongside assets under management growth, we expect return on assets to improve, driving the P/B (price-to-book) multiple re-rating. Capital recycling remains key which underpins the dividend yield of about 5 per cent.”

Announcing the deal on Nov 29, Keppel chief executive Loh Chin Hua described the acquisition as a transaction of growth that will be immediately earnings accretive and significantly expand Keppel’s footprint beyond the Asia-Pacific.

“The acquisition of an initial 50 per cent stake in Aermont, with a pathway to an eventual 100 per cent ownership and full integration, marks a major strategic step forward in Keppel’s ambition to be a global asset manager and operator, availing us of a highly attractive European platform with strong recurring fees and a premium network of partners.”