Keppel share price crashed to 11 year low

What a disaster for Keppel share price! On 24 September, Keppel share price plunged to $4.10, the lowest in the past decade. The devastating spell of value destruction must have left a bitter taste in investors’ mouth. After all, Keppel share price had enjoyed a splendid run, surging from $5.80 to $7.00 when Temasek Holdings announced $4.1 billion conditional offer to control Keppel Corp in October 2019.

Keppel share price

Indeed, the crisis of confidence in Keppel share price is largely attributed to the bombshell announcement on 1 August 2020 by Temasek Holdings not to proceed with the partial offer for Keppel. The investment company had invoked the pre-condition of material adverse change in the Group’s financial performance and walked away from the deal.

Keppel share price in winter wonderland with Temasek Holdings

Can Keppel share price meet the great expectations of Temasek Holdings?

The dramatic turn of event had led to the collapse of Keppel share price, which fell from $5.40 to the present abysmal level. Whether the current Keppel share price represents a golden buying opportunity is subject to debate. But based on the market sentiments, this counter should be bearish for at least the next couple of months. Then again, fortune favours the brave. To be successful in investing, you must buy when the stock is down and out.

To put things into perspective, the fiasco of Temasek Holdings’ withdrawal is just a mere distraction for the Group. The bigger issue on hand for Keppel is the souring business fundamentals. Another factor for the crisis of confidence is the weak oil prices, which cause oil majors to cut back on capital expenditure and reducing orders for oil rigs.

Looking back, the revival of Keppel share price in 2009 was due to the explosive surge of oil price, which stormed from a low of USD35 per barrel in 2009 to a high of USD110 per barrel in 2011. Obviously, the recovery of economic activities back then had led to significant increase in oil demands. Will history repeat itself for Keppel share price?

Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. Furthermore, I am not vested and have never invested in Keppel before. Whether Keppel share price will surge or collapse has no impact on me. Thus, this article is not meant to induce readers to make any form of investment decisions.

Keppel share price singing the blues

Given the troubles that Keppel is facing in the oil and gas sector, it should not be surprising that Keppel share price is singing the blues. For 1HFY2020, the Group reported a massive $537 million loss due to $930 million of impairments. Not many Singapore companies can withstand this sort of losses. Understandably, Keppel share price took a knock.

Keppel share price would have suffered a worse fate if not for the series of shares buybacks conducted in early September. As of 24 September, a total of 3.06 million of shares had been repurchased. The shares buybacks helped to provide support for Keppel share price. But this is not to say that Keppel share price is out of the woods.

Judging at the current situation, I expect Keppel share price to [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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Updated: September 25, 2020 — 10:29 pm

2 Comments

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  1. Curious in your long term take on the oil and gas sector in general given California’s announcement to ban fossil fuel car sales by 2035. Seems like the writing is on the wall, but wondering how much more profit is still out there before the shift.

  2. Hi Elf,

    You are absolutely right on the long-term shift towards renewable energy. This is why I have invested in Sembcorp Industries, which is building solar and wind power plants. With electric cars becoming prevalent in the future, I think the long term outlook for oil and gas industry is not so robust.

    Regards,
    Gerald
    https://sgwealthbuilder.com

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