Keppel on target to become a global asset manager with strong operating capabilities

SINGAPORE – Keppel Corp is well on its way to transforming itself into a global asset manager with strong operating capabilities, focused on creating sustainability-related solutions.

Chief executive Loh Chin Hua told a results briefing via teleconference on Thursday that the company would look to reach its target of $200 billion in assets under management (AUM) by 2030 from organic and inorganic options, including possible acquisitions of fund management platforms in Europe, the United States and Asia.

Keppel reported higher first-quarter net profit, bolstered by a significant disposal gain from the

combination of Keppel Offshore & Marine

(Keppel O&M) with Sembcorp Marine (Sembmarine).

Excluding discontinued operations and the disposal gain of about $3.3 billion, profit was slightly higher year on year, underpinned by stronger performance across the energy and environment, urban development and connectivity segments.

Revenue for the three months to March 31 was $2.26 billion, 9 per cent up on the $2.07 billion recorded a year earlier, with the energy and environment, urban development and connectivity segments reporting higher contributions.

Mr Loh said the company was well on target to sell around $17.5 billion in assets, and was on course for an asset monetisation target of $3 billion to $5 billion, with $4.9 billion announced to date, and on track to exceed $5 billion in 2023.

More details on the next phase of Keppel’s transformation plans will be provided in May, he added.

Mr Loh said Keppel will work to harness synergies as one integrated business and in line with an asset-light model, such as the already announced $2.8 billion worth of energy and environment and sustainable urban renewal-related investments in 2022.

This would be jointly undertaken by Keppel together with the private funds and/or business trust managed by Keppel Capital.

Meanwhile, Keppel will continue to pivot away from lumpy profits in the order book and property development business to focus on expanding recurring income.

In the 2022 financial year, the company more than doubled recurring income on a year-on-year basis to $560 million, compared with $262 million in 2021.

Notwithstanding the substantial distribution in specie of Sembmarine shares made, the group’s net gearing (ratio of borrowings to shareholders’ funds) increased only slightly to 0.83 times as at March 31, from 0.78 times as at December 31, 2022, on the back of the significant disposal gain, he said.

“Amid rising interest rates, we continued to strengthen our business resilience. As at (March 31), 69 per cent of the group’s borrowings were on fixed rates, with average interest cost of 3.39 per cent and weighted tenor of about three years,” he added.

Mr Loh said the company’s real estate portfolios in China and Vietnam remain healthy and had recovered strongly post-Covid-19, but it was increasingly looking at co-investments to fund projects in these markets.

Responding to analysts’ queries on Keppel’s 5 per cent stake in Sembmarine following that firm’s combination with Keppel O&M, Mr Loh said that oversight of this stake was in the hands of an independent financial adviser.

But any sale of the stake will be handled so as “not to disrupt” the market, he added.

Keppel recognised disposal gains of $3.3 billion and received cash of $500 million in the first quarter following the sale of Keppel O&M to Sembmarine.

Although the O&M unit was seeing some improvement in performance prior to the disposal, Keppel said the combination enabled the volatile earnings of the unit to be replaced with about $170 million in stable annual interest income from Asset Co vendor notes.

Mr Loh said Keppel delivered total shareholder returns of 77.7 per cent – more than eight times the Straits Times Index’s 9.2 per cent return – over 15 months from January 2022 to the end of March 2023.

“We have started 2023 on a positive note and aim to build on the strong momentum,” he added.