Keppel lifts first-half underlying profit by 7% to $513 million as key business segments grow

SINGAPORE – Improving performance at its infrastructure and connectivity segments lifted Keppel’s first-half net profit from continuing operations by 7 per cent to $513 million, from $481 million a year ago.

This was despite a 13.2 per cent drop in top-line revenue to $3.22 billion for the six months to end-June, from $3.72 billion in the year-ago period.

The results excluded write-offs of legacy offshore and marine (O&M) assets, following the sale of Keppel O&M. Including the effects of the legacy O&M assets, net profit from continuing operations was $304 million for the first half, compared with $445 million a year earlier.

The company declared an interim cash dividend of 15 cents per share, in line with last year’s payout, to be paid on Aug 23.

Recurring income rose 14 per cent to $388 million, making up 76 per cent of the first-half net profit, with higher contributions from both asset management and operations.

During the January to June 2024 period, all segments were profitable with stronger earnings in the infrastructure and connectivity segments more than offsetting a decline in real estate contributions.

Commenting on the results, Keppel chief executive officer Loh Chin Hua said the company was making steady progress in its transformation into becoming a global asset manager and operator.

“Bolstered by both organic growth and the successful acquisition of 50 per cent of Aermont Capital, our asset management profit more than doubled year on year to $75 million, while FUM (funds under management) grew 55 per cent to $85 billion in the first six months of 2024,” Mr Loh said.

He added: “Our asset-light strategy is also bearing fruit. Since end-2021, we have reduced the total assets on our balance sheet by over 14 per cent to $27.7 billion at the end of 1H24, while our funds under management 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.”

The company announced the monetisation of about $280 million of assets, raising its cumulative total to over $5.6 billion since the programme began in October 2020.

Keppel said it had also captured significant synergies since the start of 2023 from optimising its processes and centralised functions, as well as digitalising its operations, enabling it to achieve an annual run-rate of over $50 million in recurring cost savings, on track towards its target of $60 million to $70 million by end-2026.

As at end-June 2024, Keppel’s adjusted net debt to Ebitda (earnings before interest, tax, depreciation and amortisation) was 3.7 times. Around 63 per cent of its borrowings were on fixed rates, with a competitive cost of funds of 3.79 per cent and weighted tenor of about three years.  

The latest results also showed contribution from its 50 per cent stake in European real estate manager Aermont Capital, whose acquisition Keppel completed in April 2024.

Asset management fees surged 75 per cent to $203 million during the half year, representing a fee-to-FUM ratio of 55 basis points. The company said that with a combined dry powder of about $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 $27 billion.

During the first half, Keppel’s private funds and listed entities, excluding Aermont Capital, raised about $435 million in equity, and completed $2.3 billion in acquisitions and divestments. Keppel, which is transitioning into an asset manager with a target of overseeing $150 billion by 2030, is planning to launch three new funds for data centres and education assets during the July to December 2024 period.

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 (S$2.7 billion) Data Centre Fund III later in 2024. The company is also in the early stages of planning a separate sleeve for data centres in Europe together with Aermont Capital.

With the latest interim cash dividend of 15 cents and the financial year 2023 final cash dividend of 19 cents paid in May 2024, shareholders will be receiving a total cash dividend of 34 cents in 2024 for every Keppel share held. This translates into a cash dividend yield of 5.1 per cent based on Keppel’s closing share price of $6.64 on July 31, the company said.

Analysts were sanguine about Keppel’s results and its prospects. Phillip Securities in an Aug 1 report said: “Share price catalysts remain asset monetisation. Keppel targets to monetise a further $5 billion to $7 billion of assets by 2026. It has $12.6 billion worth of assets on its balance sheet that can be disposed (of).”

Citi maintains a buy call on Keppel and a price target of $8.93.

Keppel shares closed 31 cents, or 4.67 per cent, lower at $6.33 on Aug 1.