Keppel full-year dividend set to hit S$2.70 amid stronger Q3 profit

CONGLOMERATE Keppel Corporation : BN4 0% on Thursday (Oct 19) said in a voluntary business update that the net profit for its fiscal third quarter ended September was “stronger” on a year-on-year basis, with all three segments – infrastructure, real estate and connectivity – booking improvements.

For the nine-month period, the group’s earnings from continuing operations grew on the back of stronger contributions from its infrastructure and connectivity segments, the company said in a filing to the bourse. 

Keppel’s revenue from continuing operations came in at S$5.3 billion in the nine-month period, up 5 per cent from S$5 billion in the corresponding year-ago period, thanks to higher contributions from the infrastructure and connectivity segments.

Keppel said its total distribution payout for the current year is set to come in at around S$2.70 per share, including a dividend-in-specie of Keppel Reit units worth S$0.18 per share. 

Speaking to reporters and analysts on a call to discuss the company’s latest earnings, Keppel’s chief executive Loh Chin Hua said the group is working towards its next target of achieving an accumulative asset monetisation value of S$10 billion to S$12 billion at the end of 2026.

He said that the group has, over the past few months, seen an “increase in activity” across its fund platforms and asset classes such as infrastructure, commercial real estate, education assets and private credit.

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He noted that the group has more than five new funds that are now undertaking fundraising; these are slated for launches over the next two years.

“We will continue to pursue a robust deal flow pipeline of more than S$13 billion,” Loh said.

Keppel said it has continued to strengthen its business resilience amid a high-interest-rate environment. As at end-September, about 61 per cent of its borrowings were on fixed rates, with an average interest cost of 3.71 per cent and a weighted tenor of about three years.

The company’s net gearing levels, however, have risen. As at end-September, its net gearing position stood at 0.89 times, up from 0.86 times as at end-June and 0.79 times as at end-September last year.

Keppel’s chief financial officer Chan Hon Chew said the group is “very conscious” about its net gearing levels, which have gone up due in part to its active asset monetisation strategy. The group does not have a target for its gearing levels, but strives to ensure that they – in terms of net debt to equity – do not cross one time.

He said that while the company is also unable to provide “protection on dividends”, it is actively moving towards a business model that is asset-light and has recurring income streams.

Given the elevated interest rates globally, there have been concerns that certain parts of Keppel’s portfolio – its infrastructure assets, for example – could suffer impairments.

Loh said the company does not give projections on potential asset impairments, but said that higher interest rates do not automatically lead to impairments.

“Many of the (infrastructure assets) have an indexation, so in an environment where inflation is higher, we might also get higher revenue,” he said. “Interest rates are not the only determinant for impairments.”

Loh also said the group is “re-looking its playbook” for China in particular. While Keppel has been operating there successfully for over 30 years, he said the group has recognised that the country has changed, and that its needs are now different.

Instead of traditional residential-property development and sale of properties, Keppel said it will focus on sustainability-related solutions in sectors benefiting from tailwinds and government support.

“Yes, China’s real-estate market is under stress at the moment. But in the longer term, Keppel still sees the good opportunities in China (that are) not just related to real estate, but also things like energy transition, data centres and environmental engineering,” Loh added.

It was also announced on Thursday that Keppel’s Chan is to retire on Dec 31, after serving as chief financial officer for close to a decade.

Kevin Chng, the company’s current deputy chief financial officer, takes over the post on Jan 1, 2024. He joined Keppel in 2016, and held various leadership positions in the company.

He was, notably, the chief financial officer of Keppel Offshore and Marine (Keppel O&M), the group’s former wholly-owned unit, from January 2020 to February 2023.

Chng had worked with Keppel’s leadership team on the transformation and growth of Keppel O&M amid the sector downturn, as well as through the coronavirus pandemic.

He was appointed Keppel’s deputy chief financial officer in March, following the divestment of Keppel O&M.

Shares of Keppel fell 1.1 per cent or S$0.07 to close at S$6.25 on Thursday, ahead of the results update.