Robust Earnings Despite Headwinds
Keppel Corporation (KEP SP) delivered a solid set of financial results for 2024, demonstrating resilience despite a slight decline in revenue. The company reported a 5% year-on-year (yoy) increase in profit from continuing operations to S$1.064 billion, slightly ahead of expectations. This performance was achieved despite lower divestment gains and fair value adjustments compared to the previous year​.
Key financial metrics for the full year ended Dec 31, 2024:
- Revenue: S$6.601 billion (-5.2% yoy)
- Gross Profit: S$1.865 billion (-5.2% yoy)
- Pre-tax Profit: S$1.110 billion (-8.6% yoy)
- Net Profit (PATMI): S$940 million (-76.9% yoy, due to divestment gains in 2023)
- Profit from Continuing Operations: S$1.064 billion (+4.8% yoy)
- Return on Equity (ROE): 10.1% (up from 9.5% in 2023)
- Final Dividend Declared: S$0.19 per share; full-year dividend stands at S$0.34, yielding 5.1%​.
Segmental Highlights
Keppel’s diversified business model across infrastructure, real estate, connectivity, and asset management continues to drive stability and growth:
- Asset Management Business Flourishes
- Recurring income surged 92% yoy, contributing significantly to overall earnings.
- Assets Under Management (AUM) reached S$88 billion, with management reaffirming its ambitious target of S$200 billion in AUM.
- Expansion efforts are focused beyond Asia-Pacific, particularly into Europe, infrastructure, connectivity, and private credit markets.
- Despite challenges in fundraising, Keppel raised S$3.4 billion in 2024 and has S$26 billion in dry powder available for future investments​.
- Connectivity Business Shows Strong Growth
- Net profit increased by 45% yoy, attributed to operational efficiencies.
- Digitalization led to a 5.4 percentage-point EBITDA margin expansion.
- The growing SIM-only base in Singapore contributed to higher margins, offsetting competition in the mobile telecoms market​.
- Infrastructure Division Remains Resilient
- Strong operational income, though impacted by lower distribution income from Keppel Infrastructure Trust (KIT) and an EU associate.
- 70% of Keppel’s power capacity is contracted for three or more years, ensuring steady earnings​.
- Real Estate Stabilizing
- Despite a 3% drop in net profit to S$306 million, this was supported by a S$321 million valuation gain.
- Operating losses of S$111 million resulted from lower Keppel REIT contributions and initial ramp-up costs for senior living assets in China and Singapore​.
Strategic Developments & Key Projects
- Bifrost Subsea Cable – Market’s Turning Point?
- The Bifrost cable project, set to be ready in 2H25, was a key focus during Keppel’s earnings call.
- Keppel plans to launch two more fiber optic cable projects, with a total of 30 fiber pairs, signaling further expansion in the digital infrastructure space.
- Analysts believe Bifrost could be a turning point, unlocking higher valuation potential​.
- Capital Recycling & Future Growth Catalysts
- Legacy Rig Sales: With all legacy rigs now under Keppel’s control, an earlier-than-expected capital return to shareholders is a possibility.
- Floating Data Center (DC) Park: Set for completion in 2025, this could drive new revenue streams.
- Real Estate Divestments: Keppel is likely to focus on asset recycling in real estate, ensuring optimal capital efficiency​.
Stock Valuation & Recommendation
- Target Price: S$9.25 (SOTP-based)
- Current Share Price: S$6.68 (Upside potential of +38.5%)
- Valuation Multiples (2025F):
- P/E Ratio: 13.0x
- P/B Ratio: 1.1x
- Dividend Yield: 5.1%, expected to rise to 5.9% in 2027​.
Conclusion: A Bright Future for Keppel
Keppel’s strategic focus on asset-light operations, digital infrastructure, and strong capital recycling efforts continues to position the company for sustainable long-term growth. Despite near-term volatility in the real estate segment, Keppel’s high-margin businesses in connectivity and asset management are proving to be strong revenue drivers.
With a BUY recommendation and a target price of S$9.25, Keppel remains an attractive investment option for those seeking strong dividends, strategic growth, and a diversified business model​
