Keppel Ltd. (KPELF) Q4 2024 Earnings Call Transcript

2025-02-05 04:51:03 ET

Keppel Ltd. (KPELF)

Q4 2024 Earnings Conference Call

February 04, 2025, 21:00 ET

Company Participants

Loh Chin Hua - CEO & Executive Director

Kevin Chng - CFO

Manjot Singh Mann - CEO of Connectivity & M1 & Chief Digital Officer

Lu-yi Lim - CEO, Real Estate Division

Hua Mui Tan - CEO, Fund Management & Chief Investment Officer

Cindy Lim - CEO, Infrastructure Division

Conference Call Participants

Zhiwei Foo - Macquarie Research

Lim Siew Khee - CGS International

Brandon Lee - Citigroup Inc.

Felicia Tan - The Edge Singapore

Joy Wang - Deutsche Bank AG

Joel Siew - DBS

Presentation

Operator

[Abrupt Start] Mr. Louis Lim, CEO, Real Estate; Ms. Christina Tan, CEO of Fund Management and Chief Investment Officer; Mr. Loh Chin Hua, CEO; Mr. Kevin Chng, CFO; and Ms. Cindy Lim, CEO, Infrastructure.

We will begin the session with presentations by CEO, Mr. Loh Chin Hua; and CFO, Mr. Kevin Chng, followed by the question-and-answer session. Mr. Loh, please.

Loh Chin Hua

Good morning, all. 2024 was a pivotal year for Keppel, as it marked the first year of our transformation from a diverse conglomerate into a global asset manager and operator seizing opportunities amidst the energy transition, digitalization, the AI boom and demand for alternative real assets. Up to a few years ago, Keppel used to be known mainly as an offshore rig builder, a property developer and an infrastructure EPC contractor with independently run verticals.

Today, Keppel is a horizontally integrated company, hunting as a pack, with our platforms and divisions reinforcing one another to deliver stronger value, both to our shareholders and to our limited partners. We're also bringing in world-class partners and collaborators to offer better solutions across the value chain, establishing Keppel as a strategic ecosystem player.

As the new Keppel, we achieved strong results despite the volatile global environment. Our net profit from continuing operations was $1.06 billion in financial year '24, about 5% higher than the $1.02 billion in FY '23, excluding the effects of the legacy offshore and marine assets. Including these effects and the discontinued operations, our net profit was $940 million for financial year '24.

All 3 segments were profitable in 2024, with infrastructure delivering robust results and Connectivity recording 45% in earnings growth year-on-year. Asset management fees in financial year '24 grew strongly by 54% to $436 million, as we selectively made investments and also raised our funds under management from $55 billion to $88 billion through organic and inorganic growth.

FY '24 also saw a free cash inflow of $901 million compared to a free cash outflow of $384 million in the prior year. Supported by our asset-light strategy, our return on equity has been steadily improving over the years. In financial year '24, our ROE from continuing operations reached 10.1%, excluding the effects of the legacy O&M assets compared to 7.9% 2 years ago in FY '22.

Since embarking on our ambitious $17.5 billion asset monetization program in October 2020, we have announced close to $7 billion in assets monetized, including some $1.5 billion in 2024. We are making good progress towards our interim target of $10 billion to $12 billion by the end of 2026. The asset monetization announced does not include the divestment of Keppel O&M, which would have added another $4.7 billion, bringing our total monetization to date to about $11.7 billion.

Looking ahead, having taken over full control of Asset Co, we will focus on derisking our legacy O&M assets, which include Asset Co's rigs and our stake in Floatel, with a carrying value of approximately $3.6 billion, as at the end of 2024. Taking control of Asset Co, including the $1.1 billion cash in the now 100% owned subsidiary, enables us to better manage, when and how the legacy rigs are monetized.

Over the past few years, the quality of our earnings has improved significantly. In 2024, our recurring income was $766 million. This represents 72% of our net profit from continuing operations in 2024, excluding the legacy O&M assets, above the 56% in FY '22 and 21% in FY '21. Reflecting our transformation, Keppel is no longer ascribed a conglomerate discount by most analysts. We hope in time to come, the market will ascribe an appropriate growth multiple to value the growing recurring income of the new Keppel....

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