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Keppel's Rebirth As A Global Asset Manager – 2H25 & FY25 · Investor Exchange

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  Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
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  Welcome back to the Deep Dive. Today, we are looking at a transformation that
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  is, well, quite frankly, it's massive.
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  You know, for the longest time, decades, really, if you mentioned the name Keppel,
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  people had a very specific image in their heads. Oh, absolutely.
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  Heavy industry. Exactly.
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  You know, hardhats, oil rigs, shipyards, sparks flying, the quintessential industrial conglomerate.
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  It was the old economy titan, no question.
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  But if you look at the documents we have in front of us today,
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  we're talking the full year financial results for 2025.
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  That image is, well, it's practically ancient history.
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  We're looking at Keppel LTD as of mid-February 2026, and the headline isn't
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  about building ships anymore.
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  It's about being a global asset manager. It really is a complete metamorphosis,
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  and our mission today is to strip away all the noise. We've got a huge stack
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  of financial statements, CEO speeches, all of it, and we're going to look at
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  this strictly from an investor's perspective. Is the company healthy?
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  Where is the money actually coming from, and does this pivot really make sense for the future?
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  And to start, we have to talk about the elephant in the room,
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  or maybe I should call it the two numbers conundrum.
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  I was reading through the highlights, and honestly, I got a bit of whiplash.
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  Depending on which line you look at, their net profit is either down 16 percent
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  or up 39 percent. I mean, that's a huge difference.
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  It is. And it's the perfect place to start because that discrepancy, it isn't an error.
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  It basically tells the entire story of the new Keppel versus the old Keppel.
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  OK, so let's unpack this, because if I'm an investor just scanning headlines
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  on my phone, seeing a 16 percent drop is going to make me nervous.
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  Right. So that headline number, the overall group net profit,
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  came in at seven hundred and eighty nine million dollars. That is,
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  like you said, down 16% from the year before. But you have to look at why it's down.
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  And it's almost entirely due to something they call discontinued operations.
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  Specifically, an accounting loss of $222 million for the sale of M1's telco business.
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  Okay, wait, let's clarify that. When you say accounting loss,
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  does that mean M1 actually lost $222 million in cash? Like, did they just burn that money?
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  No, and that is the crucial distinction. This is not an operational failure
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  where the business set cash on fire. It's what's called a remeasurement loss
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  because Keppel is selling the business.
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  Accounting rules say they have to revalue it on the books against the sale price.
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  So they write down the value and it hits the profit and loss statement as a
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  loss. So it's a paper loss. A paper loss. Exactly.
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  It's a strategic move to get rid of a heavy asset and free up capital for the future.
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  So that's the old Keppel dragging things down or I guess the cost of shedding that old skin.
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  Precisely. It's the friction cost of the whole transition. Now,
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  if you pivot to the number of the company, and frankly, the market really cares
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  about, which is New Keppel. And that's where the numbers flip. Completely.
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  For New Keppel, net profit soared to $1.1 billion. That's a 39% jump year on year.
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  And what's really fascinating to me is where that growth came from.
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  It wasn't just one lucky break or a one-off sale.
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  It was, you know, broad-based improvement across all three of their main segments.
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  Infrastructure, real estate, and connectivity. So the core business,
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  the stuff they're actually keeping and building,
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  is growing really fast. It's not just financial shuffling. The engines are running hotter.
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  Much hotter. And if you want to see how efficient they're being with shareholder
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  money, you look at ROE, return on equity.
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  For new Keppel, it jumped from 14.9% to 18.7%. That's a serious jump.
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  I mean, usually you see ROE creep up by a decimal point or two.
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  A nearly 4% jump is huge. It tells you that for every dollar of shareholder
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  money they have, they're generating much more profit than they were just a year
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  ago. It validates the whole asset light strategy.
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  And at the same time, they're deleveraging. Their net debt to EBITDA dropped to 2.00x from 2.3x.
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  So making more money and owing less money relative to earnings,
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  which is exactly what you want to see, especially in a volatile market.
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  Precisely. It gives them a buffer. It gives them stability.
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  OK, so that's the big picture. New Keppel is profitable. It's growing.
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  Let's dig into where the money's coming from. You mentioned three segments.
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  Let's start with the big one.
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  Infrastructure. This seems to be the bread and butter now. It's the engine room. Absolutely.
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  It really is. The net profit was $803 million, up 18 percent.
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  But what really jumped out at me was this phrase recurring income.
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  They see it over and over in the report. It hit a record $703 million for this division.
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  Why is that specific number so important? Because recurring income is high-quality
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  income. It's predictable.
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  It's boring in the best possible way. It's not like selling a condo where you
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  get one big payment and that's it.
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  This is steady cash flow from long-term contracts.
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  And a huge piece of that comes from their integrated power business.
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  Right, the power business.
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  I saw a note about SparkSpreads. The CEO said they'd softened.
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  Now, for anyone who's not an energy trader, SparkSpread is basically the profit
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  margin on selling electricity.
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  If that shrinks, shouldn't their profits go down? You'd think so,
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  yes. In a normal utility model, a drop in spreads would kill your quarter.
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  But Keppel's earnings were really resilient. I mean, how do you make the same
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  money if your margins are shrinking?
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  That's the beauty of their strategy. They aren't just gambling on the daily price of electricity.
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  They pointed out that 67% of
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  their power generation capacity is contracted for three years or longer.
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  Ah, so they locked in the prices when spreads were better? Exactly.
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  They have locked in customers.
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  So even if the spot market price dips, their revenue stays stable.
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  It basically makes them immune to that short-term market noise.
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  And they're not just sitting still, right? I saw a lot of talk about Sacra.
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  The Keppel-Sacra-Kogen plant. Yes, this is a big deal.
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  It's a 600-megawatt plant. It's hydrogen-ready. And the big news is it starts
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  operations in the first half of this year, 2026.
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  And let me guess, knowing their strategy, that capacity is already sold.
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  You got it. fully contracted for 2026 and 2027.
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  So that revenue is pretty much guaranteed the moment they flip the switch.
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  It's instant cash flow. That's impressive.
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  Now, before we leave infrastructure, I have to ask about a buzzword that I usually
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  roll my eyes at, decarbonization solutions. Yeah.
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  But here, the numbers actually look serious. It's definitely not just a buzzword for them.
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  The EBITDA for that unit grew 32% to $130 million.
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  32% growth is real. It is. This is becoming a proper money spinner.
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  They're doing things like energy as a service, where they run a building's cooling
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  and power for a fee in waste to energy projects.
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  They've turned being green into a service line with actual margins.
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  Okay, so infrastructure is solid.
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  Now let's move to the shiny new object everyone's talking about.
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  Connectivity. This is the big AI narrative, right? Absolutely.
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  This segment saw net profit up 17% to $175 million.
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  But the real story isn't the current profit, it's the future potential.
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  Specifically, what they call the data center power bank. Okay,
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  I have to ask. When I hear power bank, I think of that little brick I use to charge my phone.
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  I assume Keppel isn't building giant batteries. No, not quite.
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  A power bank here is really a metaphor.
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  It means they have secured the capacity, the power contracts,
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  the water permits, the actual land for future data centers. So they've done
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  all the hard bureaucratic work of getting the permits and the grid connection,
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  and they're just banking it.
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  Precisely. And in the world of AI, you have to understand power is the new gold.
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  You can buy all the NVIDIA chips you want, but you can't run them without massive
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  amounts of guaranteed power.
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  Keppel has grown this power bank to over 1.0 gigawatt in Asia Pacific.
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  One gigawatt. That sounds huge. It is enormous.
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  A typical large data center might be 30, maybe 50 megawatts.
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  One gigawatt is 1,000 megawatts.
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  Just this January, they added a new site near Melbourne that alone is 720 megawatt.
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  So why should an investor care about empty land with a power permit?
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  Why is that valuable right now?
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  Because of the leverage, they estimate that fully activating this 1.0 GW bank,
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  actually building the data centers on it, could add $10 billion to their funds
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  under management, their FUM.
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  It's a direct pipeline to massive asset growth, all driven by the AI boom. Wow.
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  $10 billion. Just from activating that power bank. And it connects back to their
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  asset management strategy.
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  But staying on connectivity for a second, we have to mention the Bifrost cable.
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  The one linking Singapore to the U.S. West Coast. That's the one.
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  It started carrying commercial traffic in December 2025.
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  This is another long-term cash cow. Think of it like a toll road for the internet.
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  They're expecting about $200 million in fees per fiber pair over 25 years.
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  And they have multiple pairs on that cable. Correct. So it's another 25 years of recurring fees.
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  Again, improving the quality of their earnings. It really seems like they're
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  just getting out of the consumer side of things, like with the M1 sale,
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  to focus on this heavy-duty enterprise stuff. That's exactly it.
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  They sold the M1 telco business for an enterprise value of $1.43 billion.
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  That gets the competitive consumer business off their books.
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  They don't want to fight a price war over $10 SIM cards. But they kept part
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  of it, right? Yes. And notice what they kept.
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  The enterprise technology connectivity business. They want the high margin tech
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  solutions for businesses, not the retail headache. Smart.
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  Okay, let's talk about the segment that really surprised me.
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  Real estate. I thought the property market was tough everywhere. However.
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  But their net profit jumped 155% to $273 million.
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  How is that even possible? It's the pivot. If you're looking for them to just
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  build and sell condos, you're looking at the wrong company.
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  They're shifting to real estate as a service.
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  Okay, real estate as a service. Break that down for me. It means they're making
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  money from fees and smart capital recycling, not just holding heavy assets.
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  So the profit jump this year came from higher acquisition fees,
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  like when Keppel Reit bought a stake in Marina Bay Financial Center Tower 3.
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  Keppel, the parent, earns a fee on that transaction.
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  And from selling assets, like that project in India. Yes, the One Paramount
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  project, and also a partial sale of Saigon Center in Vietnam.
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  This is capital recycling. They build or fix an asset, sell it,
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  often to one of their own funds, earn a fee on the sale, and then earn a recurring fee for managing it.
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  It sounds like they're turning real estate into a financial product.
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  They aren't just landlords. They're bankers for buildings.
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  That's exactly what an asset light model is. You use other people's money to
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  own the heavy stuff, and you earn fees for your expertise in operating it.
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  Which brings us perfectly to the big one, asset management. This is the new identity, right?
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  Everything feeds into this. It is the unifying theme.
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  Their funds under management, or FUM, now stand at $95 billion.
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  That's up 8% year on year. And they have that big target of $100 billion by
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  the end of this year, 2026.
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  That's the immediate goal, which honestly, they're very close to hitting.
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  But the big, big goal is $200 billion by 2030.
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  Doubling in four years. That is aggressive. It's ambitious. It's ambitious.
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  Look at the revenue. Asset management fees brought in $453 million this year.
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  As that FUM grows, that fee income grows, it's scalable in a way that building oil rigs never was.
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  And to fuel all this, to get the capital, they're selling off the old Keppel.
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  We talked about M1, but the monetization program is just massive.
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  It's the fuel for the whole engine.
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  They announced $2.9 billion in divestments in 2025 alone.
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  Since 2020, they've unlocked $14.5 billion from selling old assets.
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  But they're not done yet, are they? I saw a number for the non-core portfolio that seemed.
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  Far from done. They still have what they call the non-core portfolio.
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  This is a pile of assets still worth about $13.5 billion.
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  And what's in that pile? It's the ghost of Keppel past. Legacy rigs,
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  land banks in China and Vietnam, some old logistics assets, stuff that just
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  doesn't fit the new asset manager vibe.
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  And why should the average investor pair?
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  Why not just hold them? Because every dollar that's tied up in a rusty oil rig
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  is a dollar that isn't earning that beautiful 18% ROE we talked about. It's a drag.
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  In fact, that non-core segment actually lost $84 million this year. It's just dead weight.
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  So the faster they sell that $13.5 billion pile, the faster they can pay down
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  debt, invest in AI projects, or, and this is the best part for investors, pay dividends.
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  Exactly. And that brings us to the show me the money section. Let's talk about that.
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  If I held Keppel shares in 2025, how did I do? You did spectacularly well.
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  The total shareholder return was 58.5%. Wow.
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  58%. For context, the Straits Times Index, the benchmark for Singapore, returned 28.8%.
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  Keppel didn't just beat the market, they doubled its performance.
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  That is incredible. And what about dividends?
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  They're paying out about 47 cents per share total. That's up 38% year on year.
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  Okay, break that down because it looked like a mix of cash and other stuff. Right.
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  So 34 cents is the ordinary cash dividend.
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  That comes from the profits of the new Keppel. That's the reliable part.
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  Then there's a special bonus, which is about 13 cents. And that special part
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  is linked to those asset sales.
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  Exactly. Their policy is to pay out 10 to 15 percent of the gross value of asset
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  sales as special dividends.
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  So as they sell that 13.5 billion dollar pile, shareholders get a cut.
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  But it's not all cash, right? No. The special dividend is split.
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  You get two cents in cash and then something called a dividend in specie.
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  For every nine Keppel shares you hold, you get one unit of Keppel REIT.
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  OK, so instead of giving me all cash, they're giving me shares in their real
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  estate investment trust. Correct.
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  Which is worth about 11 cents per Keppel share.
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  It's a clever way to distribute value without draining all their cash.
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  Plus, it gives you an asset that also pays a dividend. And they were buying
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  back their own shares, too.
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  $116 million worth in the second half of 2025.
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  It just shows confidence. They're telling you they think their stock is undervalued.
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  Okay, so the past year was great. The transformation is working.
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  Right. But looking forward, what's the outlook?
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  Is it all smooth sailing from here? Well, the bull case is pretty clear.
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  Recurring income is way up. They are positioned perfectly for the three biggest megatrends right now.
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  The energy transition, AI, and digitalization, and the big shift to asset management.
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  It feels like they really managed to get in the right place at the right time.
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  They have. But we have to talk about the bear case. The risks.
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  It's not all sunshine. What worries you? Execution risk.
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  On that non-core portfolio, that $13.5 billion pile of legacy stuff,
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  that is a lot of stuff to sell.
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  If the global economy slows, or if the property market in China or Vietnam gets
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  worse, selling those land banks becomes really hard.
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  And until they sell them, they're a drag on the number. Yes.
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  Remember, that segment lost money this year. If they can't sell those assets,
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  it just clouds the clean, shiny numbers of the new Keppel.
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  The CEO also mentioned things like inflation and trade tariffs.
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  Right. They're a global business.
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  Trade restrictions can hurt their costs, especially when they're building up
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  these big infrastructure projects.
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  And if interest rates stay high, that can hurt their real estate valuations.
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  But overall, the market seems convinced. The stock price speaks for itself.
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  The re-rating of the stock price suggests the market buys the story.
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  They've convinced investors they're not a sluggish conglomerate anymore,
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  but a nimble asset manager, and that commands a higher valuation.
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  So we have a company that has fundamentally changed its DNA,
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  is riding the AI and energy ways, and is aggressively returning cash to shareholders.
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  It sounds like a textbook turnaround.
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  It certainly looks that way from the 2025 numbers. They've done the hard part,
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  now they just need to keep up the speed. But here's a thought to leave you with.
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  Keppel is aiming for $200 billion in funds under management by 2030.
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  They're at $95 billion now.
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  That means they need to double in size in the next four years.
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  That is a very steep hill to climb.
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  Exactly. Is the organic growth from AI and infrastructure really enough to get them there?
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  Or will they need to make a massive acquisition to hit that number?
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  And if they do that, does that change the risk profile all over again?
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  That is the multi-billion dollar question, isn't it?
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  Growth is great, but disciplined growth is hard. Something to keep an eye on.
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  That wraps up our deep dive into Keppel's 2025 results. Thanks for listening.
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  Thank you. And before we go, the mandatory disclaimer.
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  This content is intended to serve strictly and only as an informational,
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  independent, objective summary of recent events and should in no way be interpreted,
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  construed, or relied upon by any party as insight, information,
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  or financial advice. See you next time.