Keppel Corp - Stock Analyst Research

Target Price* 7.980
Recommendation ACCUMULATE
Market Cap*-
Publication Date5 Feb 2024

*At the time of publication

Keppel Ltd - Energy buttressed bottom line

  • FY23 core net profit grew 5.6% YoY, in line with our expectations. Recurring income grew 54% to S$773mn, or 88% of net profit. Infrastructure made up 90% of this.
  • Growth was underpinned by a higher margin from energy sales, offset by the doubling of interest expense to S$328mn, and S$111mn loss on distribution of K Reit units to Keppel shareholders.
  • Energy earnings are sustainable, with 60% of capacity locked in on long-term contracts for more than 3 years. A lower interest rate environment could rejuvenate M&A and fundraising, lifting funds under management. The sale of the rigs in AssetCo could return S$3.1bn to the group, we estimate.
  • Downgrade to ACCUMULATE from BUY on recent share price gains. We raised FY24e net profit projections by 0.4%. Our SOTP-derived TP is revised higher to S$7.98 (prev S$7.52), as recurring income takes a bigger share of net profit.



The Positives

+ Integrated power business doubled operating income and margins, benefitted from  improved energy spark spread and exit from low-margined legacy contracts. 90% of its capacity is contracted for >1 year, providing visible and sustainable earnings. KIT contributed higher fees after a change in fee structure.


+ M1 grew revenue by 6%, after the acquisition of a Malaysian ICT in late 2022. Key drivers were higher enterprise customer sales (+27%) and total customers (+2%), and recovery of roaming services to 80% of pre-COVID.


The Negatives

– Real estate division was impacted by higher interest expense, lower fair value gains on investment properties and higher overheads at asset management units. The distribution of K Reit units to Keppel shareholders led to a S$111mn loss as the book value exceeded the market value.


– Recurring fee income from fund management fell 5.5% to S$86mn. About S$5bn new funds was raised in FY23. Investors’ appetite was muted amidst rising interest rates and tighter credit conditions. But the pace could pick up in FY24, as recently-acquired Aermont Capital extends its investor reach, and the interest rate environment turns favourable.  


– Net gearing rose to 0.9x. Management has an internal net gearing threshold of 1x. Free cash flow was negative S$228mn. Net debt as at end Dec was S$9.7bn, at an average interest cost of 3.75%. Interest expense doubled to S$328mn.

About the author

Peggy Mak
Research Manager

Peggy has been a sell-side equity analyst for 22 years and a fund manager for 15 years.

Contact us to Open an Account

Need Assistance? Share your Details and we’ll get back to you


This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) pursuant to a separate engagement before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.  

An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.  

Investments are subject to investment risks including the possible loss of the principal amount invested. The purchase of a unit in a fund is not the same as placing your money on deposit with a bank or deposit-taking company. There is no guarantee as to the amount of capital invested or return received. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved.  

Where applicable, fund(s) may invest in financial derivatives and/or participate in securities lending and repurchase transactions for the purpose of hedging and/or efficient portfolio management, subject to the relevant regulatory requirements. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products.  

The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <> for more information in relation to the dividend distributions.  

The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.  

The information herein are not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The Products is not offered to U.S. Persons. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the Products. Any member of the PhillipCapital Group of Companies may have acted upon or used the information, analyses and opinions herein before they have been published. 

This advertisement has not been reviewed by the Monetary Authority of Singapore.  


Phillip Capital Management (S) Ltd (Co. Reg. No. 199905233W)  
250 North Bridge Road #06-00, Raffles City Tower ,Singapore 179101 
Tel: (65) 6230 8133 Fax: (65) 65383066