Phillip Securities Research
25 April 2025
Keppel Ltd: Earnings Growth More Visible
Keppel Ltd, a Singapore-based conglomerate, is the subject of this research update. The report focuses on Keppel’s 1Q25 performance and future prospects. The recommendation for Keppel remains a BUY with an unchanged target price (TP) of S\$8.00. [[1]]
Investment Thesis: Improved Earnings Growth Visibility
The core investment thesis revolves around the improved visibility of operating earnings growth from the second half of 2025 onwards. This growth is expected to be driven by several key projects: [[1]]
- Leasing of Keppel South Central
- Commissioning of Bifrost cables
- Keppel Sakra Cogen Plant
1Q25 Performance Highlights
- Net profit increased by 25% year-over-year (YoY), driven by infrastructure and real estate sectors. [[1]]
- Specific contribution of valuation gains to net profit was not disclosed. [[1]]
- Asset management fees grew 9% to S\$96 million, supported by S\$1.6 billion of equity raised. [[1]]
- S\$347 million of assets have been monetized year-to-date (YTD). [[1]]
- The S\$10-12 billion monetisation target remains unchanged (cumulative: S\$7.2 billion). [[1]]
- Monetisation will include 63.36 million Seatrium shares available for sale from the end of March 2025. [[1]]
Positive Catalysts
- Earnings Growth: Explicit net profit growth of 25% YoY in 1Q25. 1Q24 only mentioned net profit improved YoY. [[1]]
- The quality of earnings is believed to be largely from real estate disposal gains in Vietnam and China. [[1]]
- Asset management fees growth of 9% YoY to S\$96mn was healthy, albeit slower than 1Q24’s 55% growth that was aided by acquisition fees. [[1]]
- Better Earnings Growth Visibility: Most divisions are expected to enjoy operational earnings growth upon project completion. [[1]]
- Keppel South Central has around 50% of office space and retail units committed or in active negotiation. [[2]]
- Infrastructure earnings will rise from the Keppel Sakra Cogen Plant, operational in 1H26, with 100% of its 600MW capacity contracted and gas purchases hedged. [[2]]
- Connectivity will benefit from the BiFrost subsea cables commissioning in 2H25, generating rental and maintenance fees. [[2]]
Negative Factors
- Mobile Consumer Softness: M1’s mobile subscribers continue to decline. [[2]]
- Postpaid subscribers slipped 6.6% YoY to 1.81 million, due to intense price competition and customer churn. [[2]]
- EBITDA grew YoY due to enterprise operations’ strength in cloud solutions (hybrid, security, migration). [[2]]
Outlook and Strategy
- Management stated there is no direct impact from the trade war. [[2]]
- Demand for data centers remains robust. [[2]]
- Smaller pension funds sentiment may be muted due to asset allocation reasons. [[2]]
- Weakness in public equities may elevate the allocation of real assets. [[2]]
- Keppel’s differentiation is its operational strength. [[2]]
- The weakest segment is consumer mobile. [[2]]
- The current weakness in M1’s consumer and upcoming spectrum purchase as a trigger for monetising this business. [[2]]
- On the disposal of Rigco, lower oil prices have impacted sentiment. [[2]]
- Rigco continues to receive enquiries, and day rates for the rigs are stable. [[2]]
- The focus is to improve the cash flows of Rigco with potential monetisation down the road. [[3]]
Financial Analysis and Forecasts
The report maintains FY25e forecasts and the SOTP-derived TP of S\$8.00. [[1]]
Key Financials: [[3]]
| Y/E Dec (S\$ mn) |
FY23 |
FY24 |
FY25e |
FY26e |
| Revenue |
6,966 |
6,601 |
6,948 |
7,450 |
| EBIT |
1,076 |
1,215 |
1,160 |
1,216 |
| NPAT |
4,067 |
940 |
828 |
883 |
| Dividend yield |
5.2% |
5.2% |
5.3% |
5.5% |
| P/NAV (x) |
1.1 |
1.1 |
1.0 |
1.0 |
| P/E (x) |
2.9 |
12.3 |
13.9 |
13.1 |
| ROE (%) |
7.7% |
7.4% |
7.2% |
7.5% |
Valuation Method: SOTP valuation [[3]]
Recommendation
Maintain BUY with unchanged TP of S\$8.00 [[3]]
- Last Close Price: SGD 6.590 [[3]]
- Forecast Div: SGD 0.350 [[3]]
- Target Price: SGD 8.000 [[3]]
- Total Return: 26.7% [[3]]
Company Data
- Bloomberg Code: KEP SP [[3]]
- O/S Shares (MN) : 1,815 [[3]]
- Market Cap (USD mn / SGD mn) : 9164 / 12051 [[3]]
- 52 – WK HI/LO (SGD) : 7.15 / 5.61 [[3]]
- 3M Average Daily T/O (mn) : 4.30 [[3]]
- Major Shareholder (%) TEMASEK HOLDINGS 20.6% [[3]]
Total Return (%) [[3]]
- 1MTH: COMPANY (6.7), STTF RETURN (2.1)
- 3MTH: COMPANY (4.5), STTF RETURN 1.2
- YTD: COMPANY (6.4), STTF RETURN 2.1
Price vs. STTF [[3]]
(A graph showing Keppel’s price performance against the STTF Index is mentioned but not visual data is available) [[3]]
Financial Statements Overview
Income Statement [[4]]
| Y/E Dec, (\$’mn) |
FY22 |
FY23 |
FY24 |
FY25e |
FY26e |
| Revenue |
6,620 |
6,966 |
6,601 |
6,948 |
7,450 |
| Materials and Subcontract costs |
(5,174) |
(4,998) |
(4,737) |
(4,947) |
(5,334) |
| Staff costs |
(668) |
(704) |
(712) |
(702) |
(760) |
| Depreciation and amortisation |
(207) |
(221) |
(208) |
(220) |
(235) |
| Other items |
(6) |
34 |
270 |
80 |
95 |
| EBIT |
565 |
1,076 |
1,215 |
1,160 |
1,216 |
| Investment income |
49 |
78 |
61 |
70 |
65 |
| Net finance expenses |
(55) |
(263) |
(327) |
(305) |
(303) |
| Share of results of associates |
536 |
322 |
162 |
200 |
230 |
| Profit before tax |
1,095 |
1,214 |
1,110 |
1,125 |
1,208 |
| Taxation |
(245) |
(290) |
(244) |
(259) |
(278) |
| Minority interests |
5 |
(27) |
(22) |
(27) |
(35) |
| Perpetual securities holders |
(12) |
(12) |
(12) |
(12) |
(12) |
| Adj. Net Profit |
844 |
885 |
832 |
828 |
883 |
| Discontinued operations/FV |
89 |
3,181 |
108 |
– |
– |
| Profit attributable to owners |
933 |
4,067 |
940 |
828 |
883 |
Balance Sheet [[4]]
| Y/E Dec, (\$’mn) |
FY22 |
FY23 |
FY24 |
FY25e |
FY26e |
| ASSETS |
| PPE & Investment Properties |
5,501 |
5,781 |
9,784 |
9,994 |
10,139 |
| Others |
10,554 |
14,691 |
11,256 |
11,106 |
10,986 |
| Total non-current assets |
16,055 |
20,472 |
21,039 |
21,100 |
21,124 |
| Cash and cash equivalents |
1,142 |
1,266 |
2,302 |
2,512 |
2,769 |
| Stocks |
2,301 |
2,110 |
1,924 |
1,903 |
2,050 |
| Receivables |
1,228 |
1,694 |
1,625 |
1,523 |
1,633 |
| Others |
(8,913) |
573 |
769 |
769 |
769 |
| Total current assets |
5,319 |
6,004 |
6,619 |
6,708 |
7,221 |
| Assets – held for sale |
9,561 |
362 |
– |
– |
– |
| Total Assets |
30,935 |
26,838 |
27,658 |
27,807 |
28,345 |
| LIABILITIES |
| Trade and other payables |
2,786 |
2,586 |
2,730 |
2,617 |
2,818 |
| ST borrowings |
3,578 |
2,422 |
1,389 |
1,389 |
1,389 |
| Others |
4,996 |
1,131 |
652 |
645 |
664 |
| Total current liabilities |
11,360 |
6,139 |
4,771 |
4,650 |
4,871 |
| LT borrowings |
6,603 |
8,538 |
10,509 |
10,509 |
10,509 |
| Others |
(7,390) |
531 |
953 |
953 |
953 |
| Total non-current liabilities |
3,438 |
9,376 |
11,462 |
11,462 |
11,462 |
| Liabilities – held for sale |
4,224 |
307 |
– |
– |
– |
| Total liabilities |
19,022 |
15,821 |
16,233 |
16,112 |
16,333 |
| EQUITY |
| Share Capital |
1,306 |
1,306 |
1,306 |
1,306 |
1,306 |
| Treasury shares |
(456) |
(387) |
(96) |
(96) |
(96) |
| Retained profits |
10,329 |
9,389 |
9,545 |
9,788 |
10,070 |
| Others |
735 |
709 |
671 |
698 |
733 |
| Total equity |
11,913 |
11,017 |
11,426 |
11,696 |
12,013 |
| Total equity and liabilities |
30,935 |
26,838 |
27,658 |
27,808 |
28,346 |
Per Share Data (S\$) [[5]]
| Y/E Dec |
FY22 |
FY23 |
FY24 |
FY25e |
FY26e |
| BVPS |
6.29 |
5.85 |
6.12 |
6.28 |
6.44 |
| DPS |
0.33 |
0.34 |
0.34 |
0.35 |
0.36 |
| EPS |
0.52 |
2.31 |
0.53 |
0.47 |
0.50 |
Cash Flow [[5]]
| Y/E Dec, (\$’mn) |
FY22 |
FY23 |
FY24 |
FY25e |
FY26e |
| CFO |
11,178 |
10,307 |
10,754 |
10,998 |
11,280 |
| Pretax profit |
1,095 |
1,214 |
1,110 |
1,125 |
1,208 |
| Adjustments |
(773) |
(347) |
(13) |
254 |
243 |
| Working capital changes |
426 |
(398) |
(253) |
9 |
(55) |
| Cash generated from ops |
747 |
469 |
844 |
1,388 |
1,396 |
| Others |
(566) |
(410) |
(644) |
(501) |
(496) |
| Cashflow from ops |
182 |
58 |
200 |
888 |
900 |
| CAPEX, net |
(696) |
(921) |
(611) |
(430) |
(380) |
| Others |
82 |
(21) |
1,312 |
350 |
350 |
| Cashflow from investments |
(615) |
(942) |
701 |
(80) |
(30) |
| Dividend paid |
(688) |
(582) |
(608) |
(596) |
(613) |
| Proceeds from borrowings, net |
(308) |
1,336 |
703 |
– |
– |
| Proceeds from equity issuance |
(500) |
(14) |
– |
– |
– |
| Others |
– |
(17) |
42 |
– |
– |
| Cashflow from financing |
(1,496) |
723 |
137 |
(596) |
(613) |
| Net change in cash |
(1,929) |
(161) |
1,038 |
212 |
256 |
| Cash at the start of the period |
3,544 |
1,445 |
1,265 |
2,291 |
2,512 |
| Currency translation |
(170) |
(18) |
(12) |
10 |
– |
| Others |
– |
– |
– |
– |
– |
| Ending cash |
1,445 |
1,266 |
2,291 |
2,512 |
2,769 |
Valuation Ratios [[5]]
| Y/E Dec |
FY22 |
FY23 |
FY24 |
FY25e |
FY26e |
| P/E (x) |
12.6 |
2.9 |
12.3 |
13.9 |
13.1 |
| P/B (x) |
1.0 |
1.1 |
1.1 |
1.0 |
1.0 |
| EV/EBITDA (x) |
26.9 |
16.4 |
14.9 |
15.2 |
8.0 |
| Dividend yield |
5.0% |
5.2% |
5.2% |
5.3% |
5.5% |
Growth & Margins [[6]]
|
FY22 |
FY23 |
FY24 |
FY25e |
FY26e |
| Growth |
| Revenue |
0.1% |
5.2% |
-5.2% |
5.3% |
7.2% |
| EBITDA |
-45.7% |
68.1% |
9.7% |
-3.0% |
5.2% |
| EBIT |
-50.0% |
90.4% |
12.9% |
-4.6% |
4.8% |
| PBT |
-32.0% |
10.8% |
-8.5% |
1.4% |
7.3% |
| Margins |
| EBITDA margin |
11.7% |
18.6% |
21.6% |
19.9% |
19.5% |
| EBIT margin |
8.5% |
15.4% |
18.4% |
16.7% |
16.3% |
| Net profit margin |
12.7% |
12.7% |
12.6% |
11.9% |
11.9% |
Key Ratios [[6]]
|
FY22 |
FY23 |
FY24 |
FY25e |
FY26e |
| ROE |
6.9% |
7.7% |
7.4% |
7.2% |
7.5% |
| ROA |
2.7% |
3.1% |
3.1% |
3.0% |
3.1% |
| Net Gearing |
75.9% |
88.0% |
84.0% |
80.2% |
76.0% |
Recommendation Rating System
| Total Returns |
Recommendation |
| > +20% |
Buy |
| +5% to +20% |
Accumulate |
| -5% to +5% |
Neutral |
| -5% to -20% |
Reduce |
| < -20% |
Sell |
Ratings History
(A graph showing Market Price vs. Target Price is mentioned but not visual data is available) [[7]]
Contact Information
Singapore Research Team [[8]]
- Head of Research: Paul Chew – paulchewkl@phillip.com.sg
- Research Admin: Qystina Azli – qystina@phillip.com.sg
- Technical Analyst: Zane Aw – zaneawyx@phillip.com.sg
- Property | REITs: Darren Chan – darrenchanrx@phillip.com.sg
- Property | REITs: Liu Miaomiao – liumm@phillip.com.sg
- Banking | Auto: Glenn Thum – glennthumjc@phillip.com.sg
- US Tech Hardware | E-commerce | ETF: Helena Wang – helenawang@phillip.com.sg
- Construction | Semiconductors: Yik Ban Chong (Ben) – chongyb@phillip.com.sg
Regional Member Companies [[8]] [[9]]
- SINGAPORE: Phillip Securities Pte Ltd
- MALAYSIA: Phillip Capital Management Sdn Bhd
- HONG KONG: Phillip Securities (HK) Ltd
- JAPAN: Phillip Securities Japan, Ltd.
- INDONESIA: PT Phillip Securities Indonesia
- CHINA: Phillip Financial Advisory (Shanghai) Co Ltd
- THAILAND: Phillip Securities (Thailand) Public Co. Ltd
- FRANCE: King & Shaxson Capital Limited
- UNITED KINGDOM: King & Shaxson Capital Limited
- UNITED STATES: Phillip Capital Inc
- AUSTRALIA: Phillip Capital Limited
- CAMBODIA: Phillip Bank Plc
- INDIA: PhillipCapital (India) Private Limited
- TURKEY: PhillipCapital Menkul Degerler
- DUBAI: Phillip Futures DMCC [[9]]
Important Information [[10]] [[11]] [[12]] [[13]] [[14]] [[15]]
This section includes disclaimers and legal information regarding the report’s distribution, usage, and potential conflicts of interest. It emphasizes that the report is for personal use only and should not be reproduced or distributed. The information is obtained from public sources believed to be reliable, but Phillip Securities Research does not guarantee its accuracy or completeness. The report is not a substitute for professional financial advice, and recipients should exercise their own judgment. Phillip Securities Research and its affiliates may have financial interests in the mentioned securities and may provide services to the issuers. The report is not directed at or intended for distribution to or use by any person or entity in any jurisdiction where such distribution, publication, availability or use would be contrary to the applicable law or regulation. Where the report contains research analyses or reports from a foreign research house, recipients of the analyses or reports are to contact Phillip Securities Research (and not the relevant foreign research house) in Singapore in respect of any matters arising from, or in connection with, the analyses or reports; and to the extent that the analyses or reports are delivered to and intended to be received by any person in Singapore who is not an accredited investor, expert investor or institutional investor, Phillip Securities Research accepts legal responsibility for the contents of the analyses or reports. [[10]] [[11]] [[12]] [[13]] [[14]] [[15]]
