Keppel Ltd. 1Q 2026 Business Update: Key Insights for Investors

Resilient Performance Amidst Volatility

Keppel Ltd. has delivered a resilient performance for the first quarter of 2026, navigating a challenging and volatile international environment. While the net profit for the “New Keppel” saw a slight year-on-year reduction, the company’s recurring income improved modestly, driven by higher operational contributions and stable asset management profits. Importantly, both the Infrastructure and Connectivity segments outperformed, whereas Real Estate contributions declined due to the absence of one-off valuation and divestment gains that occurred in 1Q 2025.

Including the Non-Core Portfolio for Divestment and Discontinued Operations, the overall net profit was lower year-on-year. This was mainly attributed to fair value losses and lower asset monetisation gains. Despite this, Keppel’s financial position strengthened significantly, with robust free cash inflow in 1Q 2026, reversing an outflow in the previous year. Both operating and investing activities contributed to this positive cash flow, underscoring a solid financial base.

Key Highlights for Shareholders

• Asset Monetisation Programme: Keppel is aggressively advancing its asset-light strategy, targeting to monetise S\$2–S\$3 billion in non-core assets within 2026. Year-to-date, S\$385 million in non-core asset monetisations have been announced, with S\$347 million completed and realised. Notably, Keppel completed the sale of its entire 5% stake in Seatrium as of 1 April 2026, realising S\$430 million in cash at a weighted average price of S\$2.52/share, plus S\$1 million in dividends.
• Divestment of M1-Telco: This transaction is still pending regulatory approval, with the long-stop date extended to 21 May 2026. Keppel has contingency plans if approval is not forthcoming, but remains focused on completion, which could significantly impact overall monetisation figures for the year.
• Fund Management Growth: Keppel’s asset management fees rose 13% year-on-year to S\$108 million in 1Q 2026, with S\$400 million in new funds under management (FUM) added. A strong pipeline exists, with about S\$2 billion in LP commitments expected in the coming months, reflecting strong investor appetite, particularly in digital infrastructure and alternative real assets.
• Non-Core Portfolio: The company aims to substantially monetise its S\$13.5 billion Non-Core Portfolio by end-2030, providing flexibility to fund growth, reduce debt, and reward shareholders. Progress is visible with ongoing divestments in both real estate and legacy O&M assets.
• Strong Cash Flow & Financial Health: Free cash inflow improved significantly, supported by both operating and investing activities. Distributions and divestment proceeds from sponsor stakes and co-investments now represent almost three-quarters of the amount received for FY2025.

Operating Platform Updates

Infrastructure

• The integrated power business remained resilient despite softening spreads, with only a slight EBITDA decline. The company is positioning to secure long-term power sales, leveraging a tight supply-demand window.
• The Keppel Sakra Cogen Plant is on track for generation readiness in 1H 2026, expected to contribute to recurring income.
• The Decarbonisation & Sustainability Solutions (DSS) business secured over S\$700 million in new contracts in 1Q 2026, expanding the DSS contract book to S\$7.6 billion, providing 10–15 years of revenue visibility.

Real Estate

• S\$382 million in real estate divestments have been announced year-to-date, supporting the asset monetisation programme.

Connectivity

• Construction has begun on the Floating Data Centre project, with Keppel DC SGP 9 scheduled to start in mid-2026 and targeted for completion by end-2027. Strong pre-commitment interest from hyperscalers is noted.
• In Australia, the company is actively engaging potential customers for AI data centre projects at its 720 MW ‘powerbank’ site near Melbourne, with strong interest from hyperscalers and neocloud players.
• Advanced discussions are ongoing for the two remaining Bifrost fibre pairs, with contracts expected in 1H 2026.

Key Risks and Market Sensitivities

• Middle East Conflict: Keppel’s direct exposure to the Middle East is limited, and operations remain unaffected so far. Fundraising and asset monetisation are also unaffected, with strong LP traction including Middle East investors. However, management is closely monitoring second-order effects such as gas supply disruptions and energy price volatility, which could impact fundraising, asset monetisation, and macroeconomic conditions. Keppel has diversified gas supply, and mechanisms such as fuel hedging and cost pass-throughs are in place to manage fuel price risks.
• Power Business: The spark spreads (a key profit driver) showed a slight decline in 1Q 2026 but have rebounded post-Middle East crisis, up more than \$20 compared to earlier in the year. The company expects resilience in power spreads, with opportunities to lock in longer-term contracts at favourable rates as customers seek price certainty amidst volatility.
• Legacy Rigs: Strong buyer and charter interest has emerged for legacy rigs, supported by higher long-dated oil prices and a tighter rig market. Day rates discussed are 10–15% higher than before, and Keppel is preparing unfinished rigs for work. Successful monetisation or chartering of these rigs could significantly enhance cash flow and asset values.

Investor-Relevant Financial and Strategic Details

• Asset Monetisation: The S\$2–S\$3 billion target for 2026 is ambitious but considered achievable, with a much larger pool of assets under consideration. This target includes possible monetisation of rigs, real estate, and other non-core assets.
• Seatrium Divestment: The full value of cash received from the Seatrium stake sale may not be fully reflected in 1Q 2026 numbers, as only completed portions count towards the monetisation total for the quarter.
• Fundraising Momentum: Strong interest from investors in data centre, infrastructure, and education funds, with a high likelihood of robust fundraising in 1H 2026.
• Gas Supply: Less than 20% of Singapore’s gas comes from the Middle East, and Keppel’s exposure is significantly lower due to its diversified portfolio and long-term contracts. Replacement gas is indexed to JKM, but long-term contracts are Brent-indexed, offering some insulation from global LNG price spikes.

Upcoming Catalysts and Potential Share Price Movers

• Completion of the M1-Telco Divestment: Approval and finalisation could provide a material boost to monetisation figures and overall free cash flow.
• Further Asset Sales: Successful monetisation of rigs, real estate, and other non-core assets, potentially exceeding the S\$2–S\$3 billion target, may drive share price upside.
• Fundraising and Fee Growth: Continued growth in funds under management, especially with strong demand for digital infrastructure and alternative real assets, could underpin further increases in recurring fee income.
• Power Market Dynamics: Elevated power spreads and successful recontracting at higher rates could lead to a positive re-rating of the Infrastructure segment.
• Legacy Rigs Monetisation: Increased day rates and successful charters or sales could result in significant value uplift for Keppel’s AssetCo, with positive implications for both cash flow and book value.

Conclusion

Keppel Ltd. is demonstrating resilience and proactive management amidst a volatile macroeconomic and geopolitical backdrop. The company’s progress on asset monetisation, fundraising, and operational excellence in Infrastructure and Connectivity, alongside robust financial discipline, positions it well for future growth. Key potential share price drivers include successful completion of major divestments (notably M1-Telco), continued strong fundraising, value realisation from legacy rigs, and maintaining strong power spreads.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should conduct their own due diligence or consult a qualified adviser before making investment decisions. The author and publisher are not responsible for any losses arising from reliance on the information provided above.

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