‘New Keppel’ shows promise; M1 sale and green projects could stir more excitement

[SINGAPORE] Once the world’s largest offshore rig builder, Keppel is doubling down on efforts to transform into an asset manager – most recently with its plans to divest a S$14.4 billion portfolio of non-core assets.

The move carries the promise of a more streamlined focus and resilient earnings growth. Further catalysts that investors can look out for include the potential sale of M1’s consumer mobile business, as well as Keppel’s green energy projects, riding on the momentum of the Asean power grid.

But whether investors will eventually re-rate Keppel to trade at the richer valuations of global asset managers – such as KKR and Blackstone – remains to be seen.

In its latest earnings on Jul 31, Keppel announced that it will “substantially” monetise a portfolio of non-core assets by 2030.

The portfolio includes legacy offshore and marine assets, residential land bank, certain property developments and S$2.9 billion of embedded cash and receivables.

The market is certainly upbeat. News of the divestment, coupled with a S$500 million share buyback, lifted Keppel’s share price to a six-year high on Jul 31. At least 10 analysts now have “buy” calls on Keppel, of whom seven have upgraded target prices in the past week.

DBS Group Research analyst Ho Pei Hwa said that Keppel offers a “unique and unrivalled proposition as a global asset manager”, and upgraded her target price to S$10, from S$9 previously.

She projects an 8 per cent compound annual growth rate for core earnings over the next two years, while noting that the company looks set to hit its target of S$100 billion in funds under management ahead of the 2026 deadline.

Phillip Capital’s research head Paul Chew expects an “earnings spurt” over the next two to three years.

He sees growth in 2026 being driven by three projects: real estate development Keppel South Central, the Keppel Sakra Cogen power plant and the Bifrost Cable System, with subsea cables that connect Singapore directly to North America.

Potential M1 sale

In the near term, there are other catalysts that investors can look out for. One is the potential sale of telco M1’s consumer business, which Keppel chief executive Loh Chin Hua indicated the company remains open to, during an earnings briefing on Jul 31.

Such a sale is likely to cheer the market. CGS International analysts estimate M1’s consumer business to be worth between S$700 million and S$900 million, and see its divestment as a potential re-rating catalyst.

Chatter about the sale of M1 has been long ongoing, with fresh talk about a potential merger with StarHub surfacing last year.

The telco market is “overcrowded”, with four operators and about seven mobile virtual network operators, noted Manjot Singh Mann, the CEO of Keppel’s connectivity segment, at the briefing.

Many SIM-only plans are replacing contract plans, diluting average revenue per user across the industry.

Consolidation may then be only a matter of time, and a fruition of long-held expectations would certainly be a positive.

At the same time, Keppel stands to benefit from retaining M1’s enterprise business, which complements its data centres.

“(We) do see a lot of organisations digitalising their businesses and looking for either hybrid cloud or multi-cloud solutions. So, that is where we do see synergy between our enterprise business and our data centre business,” said Mann.

Asean grid opportunities

Another catalyst that investors can look out for is Keppel’s efforts to import renewable energy and contribute to the building of an Asean power grid, even amid the US-led backlash on green projects and the threat of tariffs.

A significant tailwind is Singapore’s plans to import 6 gigawatts (GW) of low-carbon electricity by 2035. Keppel already has two projects contributing to this effort.

In 2023, its unit Keppel Energy secured conditional approval from Singapore’s energy authority to import 1 GW of clean energy from Cambodia. Last year, Keppel Energy also secured a conditional licence to import 300 megawatts (MW) of solar power from Indonesia.

A conditional approval and conditional licence are the first and second steps, respectively, towards obtaining a full licence for energy import projects.

With the two projects, Keppel has unlocked “very large-scale” opportunities, said Cindy Lim, CEO of the infrastructure business, on Jul 31.

For instance, the 300 MW Indonesia project translates to an upstream generation capacity of about 2 to 2.5 GW of photovoltaic systems, as well as 5 gigawatt-hours of battery energy storage.

“The opportunities for an Asean power grid are very promising… We see Keppel as a front runner in this regard, and we will be playing our part to work with regulatory authorities across Asean, as well as with agencies in Singapore, to make this happen,” noted Lim.

Keppel is also building Singapore’s first hydrogen-compatible power plant: the 600 MW Keppel Sakra Cogen Plant on Jurong Island, which is set to commence operations in the first half of 2026.

Lim disclosed that Keppel may “give a positive surprise” by bringing the Sakra plant onstream earlier. The plant will expand the company’s generation capacity by nearly 50 per cent, from 1.3 GW to 1.9 GW.

These projects could lift Keppel’s infrastructure division, which saw a 12 per cent fall in revenue to S$2 billion for the first half of 2025, due to lower net generation in the integrated power business. The segment’s net profit was down 4.9 per cent, at S$346.6 million.

CGS International sees infrastructure as the “clear driver” for “New Keppel”.

To be sure, Keppel’s green power efforts come in the face of significant headwinds. Global sentiment on renewable energy has cooled, with the US doubling down on oil and gas. Tariffs remain another big wild card in this business.

That said, South-east Asia’s march towards renewable energy has been undeniable, with the improving economics of solar energy and the clear need for energy security. Keppel’s ability to ride this trend could prove to be a long-term growth catalyst.

Valuation boost?

At the earnings briefing on Jul 31, Loh suggested that Keppel could be compared to global asset managers KKR, Brookfield, BlackRock and Blackstone. He also expressed hope for a re-rating of the stock.

“As we accelerate the growth of ‘New Keppel’, we expect that the market will re-rate our stock price and accord us a growth multiple,” he said.

It will be worth observing if the current market bullishness translates to richer valuations over time. Keppel now trades at 17.2 times earnings – still some way behind BlackRock, which trades at 27 times earnings, Blackstone at 44.9 times and KKR at 65.1 times.

Whether investors will value Keppel at the levels of these asset management giants could depend on the pace and execution of the non-core asset divestments.