Keppel(KPELY) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Keppel's earnings from the asset management business more than doubled year-on-year to $75 million in the first half of 2024, with funds under management rising 55% to $85 billion since December 2023 [3][10] - Net profit from continuing operations was $513 million in the first half of 2024, a 7% increase from $481 million in the same period of 2023 [5][20] - The annualized return on equity improved to 9.8% in the first half of 2024 from 8.7% in the first half of 2023 [6][20] - Total assets decreased to $27.7 billion as of June 2024 from $32.3 billion at the end of 2021 [7] - Recurring income rose 14% year-on-year to $388 million, making up about 76% of net profit compared to 71% in the first half of the previous year [8] Business Line Data and Key Metrics Changes - The infrastructure segment achieved a net profit of $363 million in the first half of 2024, a 25% increase from $291 million in the first half of 2023 [22] - The real estate segment recorded a net profit of $129 million, down 31% from $186 million in the first half of 2023 [23] - The connectivity segment's net profit more than doubled to $76 million from $37 million in the first half of 2023 [24] Market Data and Key Metrics Changes - The infrastructure division expanded its long-term technology solutions and energy services contracts, which grew over 20% to $5.2 billion by the end of June 2024 [9] - The asset management fees grew to $203 million, up by about 75% year-on-year, mainly due to improved performance of private funds and listed vehicles [10] Company Strategy and Development Direction - Keppel aims for an interim monetization target of $10 billion to $12 billion by the end of 2026, focusing on asset monetization as a key pillar of its Vision 2030 goals [4] - The company is pursuing growth initiatives in alternative real assets, particularly in infrastructure, connectivity, and private credit, which are expected to drive demand [18] - Keppel is enhancing its operating capabilities in data centers and is exploring new sectors such as education and living sectors for future growth [46] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging macro environment but expressed confidence in the company's growth trajectory and ability to capitalize on opportunities in alternative real assets [18][60] - The company is focused on improving operational efficiency and reliability in its integrated power business to navigate market volatility [31] Other Important Information - The Board of Directors approved an interim cash dividend of $0.15 per share for the first half of 2024, reflecting confidence in Keppel's growth trajectory [8] - The company has a combined dry powder of about $25 billion, positioning it well to seize attractive asset acquisition opportunities [10] Q&A Session Summary Question: Breakdown of losses from legacy O&M contracts - CFO provided a breakdown of the $209 million loss, with approximately $67 million from Seatrium shares, $34 million from Floatel and Dyna-Mac, and $108 million from vendor notes [27][28] Question: Future dynamics of the integrated power business - Management highlighted that 60% of contracted capacity is secured for over three years, providing predictability in cash flow [30] Question: Profitability of asset management revenue - Management noted that Aermont contributed about $30 million in revenue for three months, with profitability affected by amortization [33] Question: Size and growth ambitions for data centers - The company aims to raise a third fund with a target size of $2 billion, with existing funds having an AUM of about $5 billion [34] Question: Strategy in China - Management acknowledged challenges in China but emphasized a revised playbook focusing on energy transition and data centers [43][44] Question: EBITDA growth target for decarbonization solutions - Management indicated that secured contracts for decarbonization solutions have grown to $5.3 billion, targeting over $100 million in EBITDA by 2027 [55] Question: Sustainability of dividends - Management expressed confidence in maintaining the interim dividend, supported by increasing recurring income [58][60]