Analysts upbeat on ‘New Keppel’ core operations despite group’s net profit plunge

[SINGAPORE] Analysts remained largely upbeat about Keppel’s core operations, despite a drop in the global asset manager and operator’s H1 net profit.

The group reported a 59 per cent year-on-year plunge in net profit to S$155 million for H1. The drag came from its non-core asset portfolio, which posted a net loss of S$375 million, primarily due to S$165 million in legacy rig impairments, in addition to interest costs tied to these rigs.

However, equity research houses emphasised that the operational engine of its continuing core business – which it calls “New Keppel” – remains in prime health.

DBS said that the group “offers a unique and unrivalled proposition as a global asset manager with developer and operator capabilities in real estate and the green industrial space”.

It added that Keppel has strong roots in engineering as well as a track record in capital management, and increasingly acts as a proxy for artificial intelligence-driven infrastructure demand.

Looking past its non-core drag, “New Keppel” posted a 25 per cent rise in net profit to about S$530 million in H1, from S$424 million a year earlier.

Analysts broadly concurred that the core earnings reported were in line with expectations.

DBS noted in its report on Jul 31 that the asset manager and operator is seeing “improving earnings quality and return on equity”.

“This trend should continue as the company focuses on shifting revenue from order book-based sources to fees and returns from its portfolio assets (real estate, infrastructure and digital assets),” the research house said.

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Funding goals

Analysts highlighted a primary operational milestone – Keppel reaching its funding goals well ahead of timeline.

Funds under management (FUM) expanded to S$106 billion by end-July 2026, clearing its interim S$100 billion target set for the end of the year.

UOB Kay Hian (UOBKH) said in a Jul 31 note that Keppel is “backed by favourable long-term secular trends”, with “proven fundraising/investment capabilities and deep operational expertise as an integrated asset manager and operator”.

The group is aiming to scale its FUM to S$200 billion by 2030.

DBS maintained its “buy” rating with a target price of S$13.30, emphasising that “FUM growth and the recovery/monetisation of non-core assets should enable the company to achieve its target 15 per cent return-on-equity target”.

As part of its asset-light strategy, Keppel said it carried out about S$1.7 billion of asset monetisation in 2026 to date, and is on track to reach its full-year target of S$2 billion to S$3 billion.

This includes a recently announced plan to monetise up to 10 legacy offshore rigs for about S$3.7 billion. Six of them are slated to be divested by this year for a total of S$1.2 billion.

UOBKH also reiterated a “buy” call with an updated target price of S$13.26, up from S$13.23 previously. It stated that it expects “stronger H2 2026 core earnings for Keppel, at S$545 million (+22.2 per cent year on year), driven by the full half-year contribution from the KSC power plant”.

“Fundamentals remain positive, as Keppel continues to divest its non-core assets, while scaling its fund management business towards its 2030 goals,” it added.

Keppel declared a flat interim dividend of S$0.15 per share.

“Coupled with our final dividend per share projection of S$0.19 and potentially S$0.10 special dividend, Keppel could pay S$0.44 in total for FY2026, implying a 4 per cent yield,” DBS said.

Meanwhile, UOBKH said that by its estimate, Keppel could offer a 4.2 per cent yield in 2026 to 2028.