It is not often that you hear of companies going through a makeover.
Sometimes, though, it’s necessary so that the business can be properly aligned for growth.
Companies could be bogged down by an unprofitable division or devote too many resources to a loss-making segment.
By undertaking a major corporate restructuring, these businesses can shed the underperforming division and become more profitable.
Restructuring can also help a business to divest a division that is too capital-intensive, allowing it to become asset-light and freeing it of heavy capital commitments.
Several blue-chip companies have, in recent years, undergone a radical transformation.
We review each example to see if their share prices can continue to do well post-reorganisation.
Keppel Corporation Limited (SGX: BN4)
Keppel Corporation is a conglomerate that used to have four core divisions: energy and environment, urban development, connectivity, and asset management.
It has been nearly two years since Keppel Corporation and Seatrium Ltd (SGX: S51), formerly known as Sembcorp Marine Ltd, explored a potential combination.
Late last year, Keppel finally decided to divest its offshore and marine (O&M) division to Seatrium in a S$4.5 billion merger.
Investors should note that shareholders of Keppel also received 19.13 shares of Seatrium for each share of Keppel Corporation as a dividend-in-specie.
The group has announced an encouraging set of earnings for its fiscal 2023’s first quarter (1Q 2023).
Both revenue and net profit increased year on year for 1Q 2023 with the group recognising a disposal gain of S$3.3 billion from the divestment of the O&M division.
In addition, Keppel has also received S$500 million from the above transaction and has delivered a total shareholder return of close to 78% from January 2022 till March 2023.
There may be more to come from the transformed group as it works towards its Vision 2030 goals of growing its recurring income and executing its asset-light model.
Earlier this month, Keppel Corporation announced another major reorganisation by creating three platforms to create a virtuous investment cycle.
It will also change its reporting structure to focus more on its recurring income sources and fee-based asset management arm.
Investors need to wait for more information on these initiatives, but there is a good chance that Keppel can once again pull off a successful change and continue to grow.
CapitaLand Investment Limited (SGX: 9CI)
CapitaLand Investment Limited, CLI, is a real estate investment manager (REIM) with S$132 billion of real estate assets under management and S$88 billion of funds under management as of 31 December 2022.
But it has been less than two years since CLI was listed as a REIM.
Back in March 2021, CapitaLand Limited had mooted the idea of a major restructuring by spinning off its investment management division and privatising its development arm.
CLI started trading in September 2021 and since then, has enjoyed a share price uplift of close to 16%.
Since then, the business has done well, with 2022’s core net profit rising by 23% year on year to S$609 million.
Not only has CLI declared a cash dividend of S$0.12, but it has also doled out a dividend-in-specie of units in CapitaLand Ascott Trust (SGX: HMN).
With the business doing asset light along with a strong recovery witnessed at its lodging unit, CLI looks poised to continue doing well.
Sembcorp Industries Ltd (SGX: U96)
Sembcorp Industries Ltd, or SCI, should be feeling much lighter after divesting its entire stake in Seatrium Limited after a rights issue announced by the latter nearly three years ago.
The major transaction, which left SCI with just its utility and urban development arms, allowed the group to shed its capital-intensive O&M division in Seatrium to focus on faster growth.
Since the spin-off, SCI’s shares have been on a tear, scaling a 52-week high of S$4.67 and hitting a five-year high.
Key to its transformation is the group’s focus on building and growing its renewables segment, a goal that it set during its 2021 Investor Day.
This objective allowed SCI to report a sparkling set of earnings for 2022 and declare a special dividend in tandem with the strong numbers.
Looking ahead, the future looks bright for the group.
Its gross renewables capacity has hit 9.8 GW, just shy of its 10 GW target by 2025.
SCI was also awarded its maiden greenfield renewables project in the Sultanate of Oman for a 500 MW solar plant.
Its Urban Development division signed a memorandum of understanding with nine provinces in Vietnam to develop smart industrial parks.
With business momentum still going strong for the group, it looks like SCI can continue to perform well.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.