Keppel posts bumper S$3.6 billion net profit in H1 from sale of O&M unit

KEPPEL Corp , fresh from ditching its conglomerate status to recast itself as a global asset manager and operator, reported a record net profit of S$3.63 billion for the six months ended June, up from S$498 million the year earlier.

The bumper profits – the highest in its 55-year history – were led by gains of S$3.3 billion from its divestment of the offshore and marine (O&M) unit to Seatrium.

Setting aside the discontinued O&M operations for both periods, Keppel’s net profit came in at 2.5 per cent higher, at S$444.95 million from S$434.14 million the year before.

All its three segments were profitable. The infrastructure business, the top performer for the first-half period, more than doubled its net profit to S$291 million, owing to robust earnings from the integrated power business. Net profit in the connectivity segment rose 12 per cent to S$37 million on higher operating income as M1 posted higher revenue from enterprise infocomms technology and managed services.

On the other hand, the net profit of the real estate segment dipped 29 per cent to S$186 million, mainly due to lower operating income as a result of lower contributions from sponsor stakes, higher net interest expense and costs incurred for new initiatives.

Keppel’s board has approved an interim cash dividend of S$0.15 per share for H1 2023, the same as the year before. This will be paid out on Aug 18.

A sweet addition was Keppel’s proposed special dividend in-specie (DIS) of Keppel Reit (KReit) units to mark the group’s 55th anniversary. For every five Keppel shares held, shareholders will receive one unit in the Reit.

The final value of the distribution will be based on the price of Keppel Reit units on the date the proposed distribution is completed, which is subject to Keppel shareholders’ nod at an extraordinary general meeting to be held later this year. Keppel Reit finished at S$0.92, up S$0.005 or 0.6 per cent on Thursday.

The proposed distribution, which will raise the Reit’s public float and widen its investor base, is one of Keppel’s capital-management initiatives.

“We looked at how we can monetise some of the assets we had and if approved, this would become part of the monetisation,” said Keppel chief executive officer Loh Chin Hua at a results briefing on Thursday.

He added: “But instead of selling it, we feel that it actually represents quite good value, and the yield is about 6 to 6.5 per cent. We thought this would be better...(and) we are quite sure this is what we want to hold at this point.”

In the year to date, Keppel has announced the monetisation of about S$420 million in assets, raising its cumulative total to over S$4.8 billion –and releasing S$3.8 billion in cash – since it embarked on the asset monetisation programme in October 2020.

In line with Keppel’s goal to move away from lumpy engineering, procurement and construction (EPC) profits, recurring income surged 62 per cent year on year to S$340 million over the six-month period.

In addition, over three-quarters of the group’s net profit for the period under review stemmed from recurring income, up from half in the year-ago period.

As at end-June, Keppel’s assets under management stood at S$65.6 billion, which includes S$12.4 billion in assets that can be potentially converted into fee-bearing funds under management (FUM) over time.

Keppel said that it remains “laser-focused” to grow FUM to S$100 billion by 2026, and to double that by 2030 by exploring organic and inorganic opportunities to drive growth.

Loh noted: “The strong execution of our transformation plans has enabled us to create superior, tangible value for shareholders. Over the 18-month period from Jan 1, 2022 to Jun 30, 2023, Keppel’s total shareholder return reached 118 per cent, outperforming STI’s 9.62 per cent by more than 12 times.”

“H2 2023 will present more interesting investment opportunities as the market adjusts to the new pricing paradigm, which better reflects the tighter credit markets, higher interest rates and more subdued economic growth outlook,” he added.

Keppel shares fell S$0.03 or 0.4 per cent to end the day at S$6.96.