Yahoo Finance Keppel Corporation to Grow its Funds Under Management to S$200 Billion by 2030: 7 Highlights from its Investor Day
Keppel Corporation Limited (SGX: BN4) has been on a roll.
The asset manager recently released a sparkling set of results for its fiscal 2023’s first half (1H 2023).
Its share price also hit a 52-week high of S$7.39 earlier this month.
Three months ago, Keppel had just unveiled a major reorganisation to chart the next leg of its transformation.
The move also came after the blue-chip asset manager divested its offshore and marine (O&M) division to Seatrium (SGX: S51).
Earlier this week, Keppel released its Investor Day presentation slides and we teased out seven aspects of it for your reading pleasure.
1. Stellar total shareholder returns
For 1H 2023, Keppel reported a net profit of S$3.6 billion, the highest in its 55-year record.
The impressive performance came about due to the sale of its O&M division to Seatrium.
In total, more than S$4.8 billion of asset monetisation has been announced since October 2020 with a target of hitting S$17.5 billion eventually.
The group will pay an interim dividend of S$0.15 and one unit of Keppel REIT (SGX: K71U) for every five Keppel shares held.
According to Bloomberg, Keppel’s total shareholder return in the 18 months spanning 1 January 2022 to 30 June 2023 was 118%.
This return was more than 12 times the total shareholder returns of 9.6% delivered by the bellwether Straits Times Index (SGX: ^STI).
2. A S$200 billion target for FUM
Similar to what CapitaLand Investment Limited (SGX: 9CI) is aiming to do, Keppel is also looking to bulk up its funds under management (FUM).
The group intends to drive the growth of its FUM through a virtuous investment cycle as detailed below.
Source: Keppel Corporation’s Investor Day Presentation
The above is a diagrammatical representation of what Keppel had communicated in May on its major reorganisation into three distinct platforms.
From 2016 to 2022, the group had more than doubled its asset management fees from S$128 million to S$267 million.
FUM currently stands at S$53.2 billion and the intermediate target is to get this to S$100 billion by 2026.
The eventual goal is to hit S$200 billion of FUM by 2030.
3. A large addressable market for sustainability solutions
Keppel is going big on sustainability.
The group has identified a total addressable market of US$4 trillion to US$5 trillion for sustainability solutions in Asia by 2030.
Its current energy portfolio comprises 1.9 GW of conventional energy and around 3 GW of renewables broken down into solar (65%), wind (32%) and hydroelectric (3%).
More than 99% of Keppel’s customers are locked into fixed or indexed electricity-priced plans, offering a stable recurring income source for the group.
Keppel plans to continue scaling up this platform and believes it has the potential to increase its generation capacity from the current 1,300 MW to 2,500 MW.
4. Energy-as-a-service
Keppel’s energy-as-a-service (EaaS) business shows good promise and has generated strong momentum since its inception in 2021.
The division has a scalable operating model with a current refrigeration ton (RT) capacity of 214,000 which it hopes will hit 300,000 by 2030.
EaaS is targeting new markets in Asia and has signed new contracts in Thailand and Vietnam with 31,350 RT secured.
The service offers a compelling proposition to clients as it can improve energy efficiency by 20% to 40% and lead to capital and operating expenditure savings of between 10% to 20%.
5. Turning towards sustainable urban renewal
Another promising area relates to sustainable urban renewal or SUR.
SUR refers to existing buildings that have a significant carbon footprint that can be reduced through retrofitting.
Hence, there is a large addressable market of buildings to decarbonise.
Most mature cities see a renovation rate of just 1% to 2% per year which is insufficient to meet international net zero pledges by 2050.
Retrofitting rate will need to exceed 3% per year to achieve this and this is where Keppel can come in to deliver value as a developer-operator-manager.
There is proof that SUR delivers strong financial benefits.
For example, Keppel Bay Tower reported a 31% increase in net operating income (NOI) after SUR while the Kube in Shanghai saw NOI more than triple from S$1.6 billion to S$5 million in just two years.
6. A long-term tailwind in senior living
The senior living sector has an attractive long-term tailwind because of the ageing population in Asia.
As of 2020, just under 18% of China’s population is aged 60 and above but this proportion is expected to jump to nearly one-third or 447 million people by 2040.
Keppel intends to build up its senior living capabilities through its real estate division starting in China.
Once the division has established itself, it will expand to other parts of Asia.
Management believes there is great potential for scale in this arena along with strong merger and acquisition liquidity and available portfolios to select from.
The division’s long-term goal is to create a healthcare fund or REIT.
7. Expanding its data centre footprint
Keppel continues to see healthy data centre demand with around 80% of this demand coming from hyperscalers in 2022.
More than 1,000 hyperscale data centres are expected by the end of 2024, around two times the level five years ago.
In Asia-Pacific, the total data centre supply has grown from around 700 MW in 2017 to more than 3,000 MW by 2022.
Keppel intends to expand its global footprint in the Asia-Pacific region, Japan, and Europe.
It will also focus on establishing strategic partnerships in new and existing markets and explore innovative solutions such as tropical and floating data centres.
Management is targeting Japan and India as growth markets with strong customer demand in addition to its footprint in seven countries.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
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