Keppel Ltd: Asset Management Franchise Gains Momentum — Target Price S$13.80 November 12, 2026
Brief Overview
Keppel Ltd’s key financial disclosures for the third quarter of 2026 showed nine-month net profit growing more than 20 per cent year on year, building on the 25 per cent growth recorded in the first half. Nine-month recurring income rose at a slower pace of more than 10 per cent year on year, compared with 13 per cent in the first half. The integrated power business saw nine-month EBITDA grow a disappointingly weaker 7 per cent year-on-year, as maintenance work on a turbine at Keppel Merlimau offset maiden earnings from the Keppel Sakra Cogen power plant.
Investment Positives
Accelerating Asset Management Growth
The standout development in the quarter was the sharp acceleration in asset management fees, which spiked 48 per cent year-on-year to S$154 million in the third quarter. These fees were underpinned by robust new funds under management (FUM), which jumped to S$19.5 billion year-to-date in 2026, compared with just S$6.7 billion in the corresponding period of 2025. Approximately S$6 billion of new FUM was raised in the third quarter alone. The outlook for fees remains strong, with S$23 billion worth of deals in the pipeline.
The asset management franchise is gaining meaningful traction by broadening its investor base to include sovereign wealth funds with much larger fund commitments. Investor breadth and the size of individual commitments have been rising, reinforcing the sustainability of the fundraising momentum. The group’s target to double FUM to S$200 billion by 2030 remains unchanged, implying a compound annual growth rate of approximately 15 per cent.
Monetisation Pipeline on Track
Keppel is on course to realise at least S$1.5 billion of assets this year. Assets monetised and realised rose by S$380 million in the third quarter to S$940 million, driven by the S$343 million sale of a 40 per cent stake in Empire City in Vietnam.
Beyond the current year, the monetisation pipeline remains substantial. A further S$611 million will be recognised in the second quarter of 2027 from the 51 per cent sale of Keppel South Central to Keppel REIT. Additional assets in the pipeline include the remaining 49 per cent of Keppel South Central, valued at approximately S$1 billion; a 50 per cent stake in Rigco’s six operational rigs, valued at approximately S$600 million; and M1, valued at approximately S$1.2 billion. Together, these pipeline assets are equivalent to 16 to 24 cents of special dividend, representing a meaningful potential catalyst for shareholder returns.
Investment Challenges
Weaker Than Expected Power EBITDA
Despite the commercialisation of the 600-megawatt Keppel Sakra Cogen power plant in May 2026, EBITDA from the integrated power business has slowed in the third quarter. Planned major maintenance on one of the four F-Class turbine units at Keppel Merlimau was a key contributor to the shortfall. This resulted in nine-month EBITDA growth of just 7 per cent year on year, down from 9 per cent in the first half. Infrastructure earnings face further downside risk from planned maintenance activities.
Non-Core Portfolio Drag
The non-core portfolio remains a drag on overall profitability. Overall net profit for the nine months fell 40 per cent year on year, driven by a 4 per cent reduction in the gross asset value of non-core assets remaining on the books. This decline stemmed from impairments, depreciation, operating costs and holding costs associated with these legacy assets.
Outlook
The asset management business is maintaining its fundraising momentum and building a stronger foundation of recurrent income. The franchise is broadening its investor base and securing larger commitments, which bodes well for the medium-term trajectory of management fees.
On the infrastructure side, the near-term outlook is mixed. Planned maintenance work on turbine units will dampen earnings in the short term. However, improving electricity spreads — driven by liquefied natural gas shortages and strong mobility and industrial demand — are expected to provide upside to earnings in the fourth quarter of 2026.
The monetisation pipeline remains a key feature of the investment case, with approximately S$2.8 billion of assets still to be realised, offering the potential for further special dividends.
Recommendation & Target Price
Phillip Securities Research maintains its BUY recommendation on Keppel Ltd with an unchanged target price of S$13.80. The financial year 2026 estimated adjusted profit after tax and minority interests is also unchanged. The analyst highlights the continued strengthening of the asset management franchise and the substantial monetisation pipeline as key supports for the investment case, while acknowledging near-term headwinds from power segment maintenance and the non-core portfolio drag.
Frequently Asked Questions
Q: . What is Phillip Securities Research's recommendation and target price for Keppel Ltd?
A: The recommendation is BUY with an unchanged target price of S$13.80.
Q: How much did asset management fees grow in the third quarter of 2026?
A: Asset management fees spiked 48 per cent year-on-year to S$154 million in the third quarter of 2026.
Q: How much new funds under management has Keppel raised?
A: Year-to-date 2026 new FUM reached S$19.5 billion, compared with S$6.7 billion in the corresponding period of 2025. Approximately S$6 billion was raised in the third quarter alone.
Q: What is in Keppel's monetisation pipeline?
A: The pipeline includes the remaining 49 per cent of Keppel South Central (approximately S$1 billion), a 50 per cent stake in Rigco's six operational rigs (approximately S$600 million), and M1 (approximately S$1.2 billion). A further S$611 million from the 51 per cent sale of Keppel South Central to Keppel REIT will be recognised in the second quarter of 2027.
Q: Why did the integrated power business underperform?
A: EBITDA growth slowed owing to planned major maintenance on one of the four F-Class turbine units at Keppel Merlimau, which offset the maiden earnings from the 600-megawatt Keppel Sakra Cogen power plant.
Q: What caused overall net profit to fall 40 per cent year-on-year?
A: The decline was driven by a 4 per cent reduction in the gross asset value of non-core assets, stemming from impairments, depreciation, operating costs and holding costs.
Q: What is Keppel's FUM growth target?
A: The target is to double FUM to S$200 billion by 2030, implying a compound annual growth rate of approximately 15 per cent.
Q: What could provide upside to earnings in the near term?
A: Improving electricity spreads due to LNG shortages and strong mobility and industrial demand are expected to provide upside to earnings in the fourth quarter of 2026.
This article has been auto-generated using PhillipGPT. It is based on a report by a Phillip Securities Research analyst.
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About the author
Paul Chew
Paul has more than 25 years of experience as a fund manager and sell-side analyst. He currently covers sectors such as healthcare, electronics, telecommunications, conglomerates, small caps, and strategy. He graduated from Monash University and has completed both his Chartered Financial Analyst and Australian CPA programme.
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