Date: 24 October 2024
Broker Name: Lim & Tan Securities Pte Ltd
Voluntary Business Update for 3Q & 9M 2024
Keppel Ltd provided a voluntary business update for the third quarter and first nine months of 2024. The company reported that net profit, excluding the effects of legacy offshore and marine (O&M) assets, remained comparable year-on-year (yoy) for the first nine months of 2024. Despite a year-on-year decline in net profit for the third quarter, the company achieved a 14% growth in recurring income, driven by stronger contributions from asset management and operating income.
Asset Monetisation Achievements
Keppel has continued to focus on asset-light and capital-efficient growth. In the year to date, the company has announced the monetisation of approximately S$730 million in assets, mainly from real estate projects and legacy assets. This brings Keppel’s total asset monetisation since October 2020 to around S$6.1 billion, excluding the divestment of Keppel O&M.
Reduction in Total Assets
Reflecting its asset-light strategy, Keppel has reduced its total assets by 15% from the end of 2021 to the first nine months of 2024. During the same period, Funds under Management (FUM) more than doubled, reaching S$85 billion as of the first half of 2024.
Financial Stability and Borrowings
As of the end of September 2024, about 60% of Keppel’s borrowings were on fixed rates, with a competitive average cost of funds of 3.85% and a weighted tenor of approximately three years.
CEO Commentary
Mr. Loh Chin Hua, CEO of Keppel, emphasized the company’s successful pivot to becoming an asset-light, global asset manager and operator. He highlighted the steady growth in asset management fees and recurring income, as well as the company’s ongoing asset monetisation efforts. Keppel has announced about S$730 million in divestments for the year to date and is well-positioned to seize opportunities in infrastructure and data centres.
Expansion in Data Centre Portfolio
Keppel is actively expanding its data centre portfolio to meet the increasing demand for AI-ready data centres, especially from hyperscalers. The company currently manages 35 data centres across the Asia Pacific and Europe, with a gross power capacity of 650 MW. Keppel plans to scale this capacity to 1.2 GW in the near term by leveraging access to various capital pools and other resources within its integrated ecosystem.
Fund Management and Investment Platforms
In the first nine months of 2024, Keppel generated S$299 million in asset management fees, a 68% increase year-on-year. The company has raised approximately S$700 million in equity and completed S$3 billion in acquisitions and divestments during this period. Strong investor interest has been noted for its flagship funds, including those focused on private credit, education assets, and data centres.
Strategic Digital Infrastructure
Keppel is also involved in strategic digital infrastructure projects. One notable project is the Bifrost Cable System, the world’s first subsea cable system that directly connects Singapore to North America’s west coast via Indonesia. As of the end of September 2024, the Bifrost project was 88% completed, with the main trunk expected to be ready for service in the second half of 2025.
Valuation and Investment Recommendation
At its last traded price of $6.38, Keppel Ltd was capitalized at $11.5 billion. The stock trades at 13x price-to-earnings (PE), 1.1x book value, and offers a dividend yield of 5.3%. Based on the Bloomberg consensus target price of $7.71 per share, there is a 21% potential upside over one year. The report maintains a “BUY” recommendation, citing Keppel’s successful asset monetisation and asset-light business model as key drivers for growth.
