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Keppel Ltd. (Keppel) reported a net profit of S$513 million from continuing operations for the first half of 2024, 7% higher than the S$481 million reported in 1H23[2], excluding the effects of its legacy offshore and marine (O&M) assets[3]. This translates into an annualised Return on Equity (ROE) of 9.8% in 1H24 compared to 8.7% in 1H23.
Recurring income rose 14% to S$388 million, making up 76% of 1H24 net profit on the same basis, with higher contributions from both asset management and operations.
In 1H24, all segments were profitable with stronger earnings in the Infrastructure and Connectivity segments more than offsetting a decline in Real Estate contributions. Including the effects of the legacy O&M assets, net profit from continuing operations was S$304 million for 1H24 compared to S$445 million for 1H23.
Mr Loh Chin Hua, CEO of Keppel, said, “We are making steady progress in our transformation to be a global asset manager and operator. Bolstered by both organic growth and the successful acquisition of 50% of Aermont Capital, our asset management profit more than doubled year on year to S$75 million, while FUM grew 55% to S$85 billion in the first six months of 2024. Our asset-light strategy is also bearing fruit. Since end-2021, we have reduced the total assets on our balance sheet by over 14% to S$27.7 billion at the end of 1H24, while our FUM had more than doubled during this period. Today, we are doing more with less — pursuing growth, driving recurring income and improving returns to our shareholders.”
Keppel continued to progress towards its asset monetisation and cost optimisation targets. In the year to date, the Company announced the monetisation of about S$280 million of assets, raising its cumulative total to over S$5.6 billion since the programme began in October 2020. As part of its transformation, Keppel has also captured significant synergies since the start of 2023 from optimising its processes and centralised functions, as well as digitalising its operations. This has enabled the Company to achieve an annual run-rate of over S$50 million in recurring cost savings, on track towards its target of S$60 – S$70 million by end-2026.
As at end-June 2024, Keppel’s Adjusted Net Debt to EBITDA[4] was 3.7x. Around 63% of its borrowings were on fixed rates, with a competitive cost of funds of 3.79% and weighted tenor of about three years[5].
Driving growth in asset management
As at end-June 2024, FUM[1] had grown 55% to around S$85 billion from S$55 billion at the end of 2023, with stronger performance by Keppel’s private funds and listed entities as well as the inclusion of leading European real estate manager, Aermont Capital, in which Keppel has acquired an initial 50% stake. Asset management fees[6] surged 75% to S$203 million on the same basis in 1H24, representing a Fee-to-FUM ratio of 55 basis points[7].
With a combined dry powder of about S$25 billion, Keppel and Aermont are in position to seize opportunities to acquire attractive assets that may become available when markets go through dislocations. Keppel and Aermont are concurrently pursuing an extended deal flow pipeline of S$27 billion.
In 1H24, Keppel’s private funds and listed entities, excluding Aermont Capital, raised about S$435 million in equity and completed S$2.3 billion in acquisitions and divestments. Looking ahead, Keppel plans to launch three new funds for data centres, education assets and private credit in 2H24. Riding on robust investor demand for the Company’s data centre offerings, Keppel is hopeful of achieving the first close for its US$2 billion Data Centre Fund III later this year. The Company is also in the early stages of planning a separate sleeve for data centres in Europe together with Aermont Capital.
Creating value through strong operating expertise
In the Operating Platform, the Infrastructure Division continued to strengthen its integrated power business, securing higher contracted loads with longer durations. As at end-June 2024, about 60% of its contracted generation capacity was locked in for three years and above. Following the successful upgrading of the Keppel Merlimau Cogen (KMC) power plant’s first turbine a year ago, Keppel is now embarking on upgrading the second turbine to enhance KMC’s performance, resilience and sustainability. Coupled with the new Keppel Sakra Cogen Plant, which will come onstream in early-2026, Keppel’s power generation fleet will be among the most advanced, high-efficiency fleets in Singapore and the region.
Over the same period, the Infrastructure Division’s long-term technology solutions and energy services contracts expanded by over 20% to S$5.2 billion, with revenues to be earned over 10-15 years. These contracts currently generate a recurring annual EBITDA of over S$40 million, which the Company targets to scale up to more than S$100 million per annum by 2027.
In line with Keppel’s asset-light business model, the Real Estate Division is gaining traction in providing Real Estate-as-a-Service, implementing sustainable urban renewal initiatives for buildings and providing green and smart city consultancy services respectively to Suzhou Industrial Park and the Sino-Singapore Cooperation Zone in Jinan, Shandong.
In the Connectivity Division, Keppel DC Singapore 8, which recently achieved the BCA Green Mark Platinum award, is fully-leased and expected to be ready for service from 3Q 2024 onwards. The Division is also finalising details of the first Floating Data Centre Module in Singapore and expects to take the Final Investment Decision in 2H24. Meanwhile, M1 continues to make good progress growing its enterprise business and is progressively decommissioning its legacy technology stack, which will help to improve customer acquisition while lowering its cost to acquire and serve.
Rewarding shareholders
In appreciation of the support and confidence of Keppel shareholders, the Board has approved an interim cash dividend of 15.0 cents per share for 1H24. This interim dividend, which will be paid to shareholders on 23 August 2024, is the same as last year’s interim dividend of 15.0 cents.
With the latest interim cash dividend of 15.0 cents for 1H24, and the FY23 final cash dividend of 19.0 cents per share paid in May 2024, shareholders will be receiving a total cash dividend of 34.0 cents in 2024 for every Keppel share held. This translates into a cash dividend yield of 5.1% based on Keppel’s closing share price of S$6.64 on 31 July 2024.
Financial Highlights
n.m.f. denotes No Meaningful Figure
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About Keppel Ltd.
Keppel Ltd. (SGX:BN4) is a global asset manager and operator with strong expertise in sustainability-related solutions spanning the areas of infrastructure, real estate and connectivity. Headquartered in Singapore, Keppel operates in more than 20 countries worldwide, providing critical infrastructure and services for renewables, clean energy, decarbonisation, sustainable urban renewal and digital connectivity. Keppel creates value for investors and stakeholders through its quality investment platforms and diverse asset portfolios, including private funds and listed real estate and business trusts.
[1] Gross asset value of investments and uninvested capital commitments on a leveraged basis to project fully-invested FUM.
[2] 1H23 figures exclude discontinued operations.
[3] Effects of legacy O&M assets comprise the P&L effects from Seatrium shares, the Asset Co vendor notes, and contributions from stakes in Floatel and Dyna-Mac.
[4] Adjusted net debt is defined as net debt less carrying value of vendor notes, while EBITDA refers to last 12 months’ profit before depreciation, amortisation, net interest expense and tax, excluding P&L effects from legacy O&M assets.
[5] Includes perpetual securities. For reference, the SGD 3-year swap rate was 3.05% as at end-June 2024.
[6] Includes 100% fees from subsidiary managers, joint ventures and associated entities, as well as share of fees based on shareholding stake in associate with which Keppel has strategic alliance.
[7] 1H24 Fee-to-FUM ratio is on a run-rate basis.
[8] Includes S$500 million cash component realised as part of the divestment of discontinued operations, which is presented as cash inflow from financing activities in the financial statements. The inclusion herein is for better comparability and understanding of the free cash flow.
