Keppel divested $915 million worth of assets and a further $500 million will be finalised by end of the year. Since the kick-off of its asset monetisation programme, Keppel has sold a total of $7.8 billion worth and has highlighted its plan to sell another $14.4 billion more.
The company is keeping its interim dividend at 15 cents per share but has launched a $500 million share buyback programme.
Loh notes that Keppel has reiterated its shift from a conglomerate to a hybrid operating model that combines asset management with strong operational capabilities the likes of Brookfield, KKR or Blackstone.
With $4.7 billion raised year to date, Keppel has already built up some $91 billion in funds under management (FUM). It sits on $25 billion in dry powder and is exploring deal pipeline worth $39 billion across infrastructure, digital infrastructure, and real estate.
As befitting such a business model, Keppel is generating a bigger quantum of recurring earnings. Upon reaching its target AUM of $200 billion, that implies up to $1 billion in recurring fee revenue at a 50 basis point margin.
"Keppel’s platform scale appears to be increasingly comparable to these global leaders, thus potentially enhancing its valuation re-rating potential in the near to medium term," says Loh.
However, Loh points out that CapitaLand Investment, which is another Singapore-listed company focused on this asset manager model, has "struggled" to maintain a 45 bp margin in the past few years.
Meanwhile, there are certain interesting segments shaping up. For example, given the stiff competition in the consumer mobile space, M1, Keppel's telco unit, is now focusing more on the enterprise segment and is now deriving around half of its turnover from selling ICT services and the likes to companies.
"Management underscored growing synergies between enterprise ICT solutions and Keppel’s data centre platforms, creating a more resilient and stable earnings profile," says Loh.
Elsewhere, Keppel is becoming a more significant regional energy player. Its 600MW Sakra Cogeneration Plant that is now under construction remains on track for commercial operation in 1HFY2026; Keppel has secured conditional approval to import 300MW of electricity from Indonesia, and reaffirmed its longer-term ambition to supply 1GW under the Asean Power Grid framework.
However, Loh observes that the profitability of Keppel's Singapore power-generating business has dipped from the 2022 peak.
Following the results, Loh has lowered his FY2025-27 earnings estimates by 1- 6% to account for slightly lower infrastructure earnings in 2026 from lower profitability in the Singapore power business as a result of additional market-wide capacity.
Yet, via his sum-of-the-parts valuation, Loh has derived a higher target price of $9.51, up from $9.25. Loh notes that Keppel now trades at FY2025 earnings of 14.9x and P/B of 1.3x while delivering a prospective yield of 4.4%.
"We view these investment metrics as inexpensive, especially considering the company’s more stable earnings stream given the divestment of its offshore marine business," says Loh.
For more stories about where money flows, click here for Capital Section
Paul Chew of PhillipCapital is more bullish. In his Aug 4 note, he has kept his "buy" call but has also raised his target price from $8 to $10.50, as he assumed better valuations for Keppel's infrastructure and asset management businesses.
He has also removed the holding company discount due to the virtuous synergies as asset owner and operator across the key divisions of infrastructure, real estate, asset management, and connectivity.
This speaks to Keppel's long-stated call for investors to value it less as a conglomerate, which comes with a certain level of holding company discount, but more as an asset manager, which typically fetches higher valuations.
"FY2026 will be a year of growth from Keppel South Central, Keppel Sakra Cogen power plant, and Bifrost cables completions," adds Chew, referring to the company's recent key projects or developments.
Keppel closed at $8.31 on Aug 1, down 1.89% for the day but up 20.96% year to date.
