Keppel Corp Earnings Call: Core Strength, Legacy Drags

Keppel Corporation Limited ((KPELY)) has held its Q4 earnings call. Read on for the main highlights of the call.

Keppel Corp Earnings Call: Strong New Core, Old Headwinds Linger

Keppel Corporation’s latest earnings call painted a picture of a fundamentally stronger “New Keppel” underpinned by higher recurring earnings, expanding funds under management (FUM), and generous capital returns, even as legacy and noncore drag continues to weigh on reported profit. Management emphasized robust growth in core Infrastructure, Real Estate and Connectivity operations, disciplined capital management and an accelerating asset management franchise, while acknowledging that timing and execution risks around monetizing a sizeable noncore portfolio, as well as one-off items like the M1 transaction and legacy offshore & marine (O&M) losses, remain key overhangs.

New Keppel Net Profit Growth

New Keppel, which excludes noncore and discontinued businesses, delivered a 39% year-on-year net profit increase to $1.1 billion, underlining the strength of the refocused platform. Management highlighted broad-based growth across Infrastructure, Real Estate and Connectivity, arguing that this core earnings trajectory better reflects the company’s future than the headline profit figure. The improved performance showcases how the group’s pivot toward asset-light, fee-based and recurring businesses is starting to pay off.

Strong Funds Under Management Momentum

Keppel’s asset management engine continued to scale quickly, with FUM rising from $88 billion to $95 billion by the end of 2025. The group added $10.1 billion of new FUM during the year, supporting a roughly 20% five-year compound annual growth rate and reinforcing its ambition to reach $100 billion by the end of 2026. Management pointed to a $33 billion deal pipeline as evidence of sustained momentum, positioning Keppel increasingly as a diversified asset and investment manager rather than a traditional conglomerate.

Infrastructure Delivers Record and Recurring Earnings

Infrastructure was a standout performer, delivering record recurring earnings of $703 million and net profit of $803 million, up 18% year-on-year. Integrated power EBITDA was resilient at $661 million despite market volatility, while decarbonization and sustainability EBITDA jumped 32% to $130 million, surpassing the previous $100 million target. This mix of long-term contracted infrastructure, energy transition solutions and stable operating cashflows is becoming a key pillar of New Keppel’s earnings resilience.

Improved Profitability and Balance Sheet Metrics

Profitability and leverage metrics improved materially for New Keppel. Return on equity rose to 18.7% from 14.9%, signalling better capital efficiency and stronger underlying returns. Net debt-to-EBITDA for New Keppel improved to 2.0x from 2.3x, reflecting both earnings growth and disciplined balance sheet management. Management framed these trends as evidence that the reshaped portfolio is not only larger and more recurring, but also more profitable and financially robust.

Recurring Income and Asset Management Growth

Recurring income from asset management and operations increased 21% year-on-year to $941 million, underscoring the progress of Keppel’s strategy to increase stable, fee-like earnings. Asset management fees climbed to $453 million, while asset management profit grew—management cited a roughly 15% uplift to about $189 million. This expanding base of predictable revenues gives Keppel more visibility and reduces reliance on lumpy development gains or one-off monetisation events.

Data Centers and Connectivity Scale-Up

Keppel is rapidly scaling its digital and connectivity platform. Its data center power bank has expanded from around 300 MW to more than 1 GW across Asia-Pacific, including a Melbourne site earmarked for a 720 MW AI-focused campus. Management suggested that, at scale, this power bank could underpin roughly $10 billion of data center FUM. Meanwhile, the Bifrost subsea cable entered commercial service in December 2025, with each fiber pair expected to generate substantial long-term operations and maintenance revenue over 25 years, strengthening the connectivity earnings base.

Asset Monetization Progress and Capital Returns

Asset monetisation remains central to Keppel’s strategy of recycling capital from noncore assets into higher-return opportunities. In 2025, the group announced monetisations of about $2.9 billion and completed transactions totalling roughly $1.6 billion, bringing announced monetisations since October 2020 to about $14.5 billion. Shareholders are seeing tangible benefits: total dividend per share for FY2025 was $0.47 (ordinary plus special), up 38% year-on-year, supported by a special dividend framework tied to the gross value of completed monetisations.

Shareholder Value Creation and Capital Management

Keppel underscored a strong year for shareholder value, with total shareholder return in 2025 reaching 58.5%. Alongside higher dividends, the company has a $500 million share buyback program, of which about $116 million has been deployed so far. On the cost side, Keppel has delivered $98 million in annual run-rate savings toward a $120 million target by end-2026, underpinning margin expansion and freeing up more capital for reinvestment and distributions.

Real Estate and Connectivity Segment Improvements

The Real Estate segment rebounded sharply, with net profit rising to $273 million from $107 million a year earlier, reflecting improved operating performance and portfolio repositioning. Connectivity also strengthened, with net profit up 17% year-on-year to $175 million. Notably, connectivity asset management net profit surged 47% to $50 million, driven by REIT acquisitions and new fund closings, highlighting the growing contribution of fee-based, platform-style earnings in the digital and telecoms ecosystem.

Development Pipeline and Strategic Infrastructure Assets

Keppel’s development pipeline features several strategic assets that should support future growth. Keppel Sakra Cogen, a 600 MW hydrogen-compatible power plant, is on track to start operations in the first half of 2026 and is already fully contracted for 2026–2027, providing near-term visibility. In non-power infrastructure, the value of long-term supply contracts increased by over $1 billion year-on-year to $7.1 billion, with typical tenors of 10–15 years, further locking in steady cashflows across the portfolio.

Headline Net Profit Hit by Noncore and Discontinued Items

Despite strong New Keppel numbers, reported overall net profit for FY2025 fell 16% year-on-year to $789 million, down from $940 million. The decline was largely driven by a $222 million accounting loss and a $227 million net loss from discontinued operations related to the proposed sale and remeasurement of M1’s telecom business. Management framed these as largely accounting and noncore items that obscure the underlying operational progress but acknowledged they still represent near-term earnings noise for investors.

Large Noncore Portfolio and Monetization Risk

Keppel still holds a sizeable noncore portfolio of roughly $13.5 billion earmarked for divestment, representing a multi-year monetisation journey stretching to 2030. While the company has an active track record of completed and announced deals, management cautioned that monetisation will be lumpy and exposed to market conditions, introducing timing and valuation risk. For investors, this means occasional volatility in reported earnings and cashflows as these assets are progressively sold down.

Legacy O&M and Other Losses Weigh on Results

Legacy offshore & marine assets remain a drag, with a net loss of $156 million in FY2025, mainly due to interest costs on legacy rigs and impairments of fixed assets. Investment and other activities also recorded a combined loss, including a $47 million hit, while the noncore portfolio posted a net loss of $84 million. Management stressed that these losses are tied to legacy positions that are being run down, but they continue to dilute the otherwise strong contribution from New Keppel.

Free Cash Flow and One-Off Cash Timing Effects

Total free cash inflow for FY2025 was $611 million, down from $901 million in FY2024, with New Keppel contributing $177 million. Management emphasized that the prior year benefited from a one-off consolidation of AssetCo cash of around $1.07 billion, which flatters the comparison and makes 2025 look weaker on a headline basis. Adjusting for this, cash generation from ongoing operations remains solid, but investors should expect some variability as monetisations and project cashflows phase in and out.

Integrated Power Margin Pressure from Spark Spreads

While Infrastructure overall was strong, integrated power earnings saw pressure from softening spark spreads and lower contracted spreads in the year. Management noted that spreads have been volatile, affecting margins, but reiterated their strategy of increasing long-term contracting and hedging to stabilize earnings over time. With a significant portion of capacity already contracted for the medium term, Keppel aims to reduce sensitivity to short-term power price fluctuations.

Fair Value Softness in Certain Real Estate Markets

Not all property markets moved in Keppel’s favor. The company booked fair value and operating losses in some real estate investments, particularly in parts of China, contributing to segment volatility and impairments in FY2025. Management suggested this reflects broader sector headwinds and a cautious stance on valuations, but indicated they remain selective in deploying capital and focused on enhancing the resilience of the real estate portfolio.

M1 Transaction Uncertainty and Accounting Impact

The proposed sale of M1’s telecom business remains subject to regulatory approvals, and its classification as a disposal group has already triggered an accounting loss in FY2025. Until the transaction closes, the M1 stake will continue to create earnings noise, with management portraying this as a necessary step in simplifying the portfolio and sharpening Keppel’s focus on higher-return connectivity and digital infrastructure platforms rather than traditional telco operations.

Limited Visibility on Buyback Cadence and Near-Term Guidance

Although Keppel has announced a $500 million buyback program, management declined to give a clear schedule for its deployment, insisting they will remain opportunistic and mindful of liquidity. Likewise, the company did not provide explicit net profit guidance for FY2026, citing the inherently lumpy nature of asset monetisations and market volatility. Investors are therefore guided to focus more on medium-term structural targets and recurring income growth than precise near-term earnings forecasts.

Forward-Looking Guidance and Strategic Milestones

Looking ahead, Keppel reaffirmed several concrete targets and milestones. The group aims to grow FUM from $95 billion to $100 billion by end-2026, while lifting annual run-rate cost savings to $120 million by the same date, up from $98 million already achieved. Management reiterated the plan to substantially monetise the $13.5 billion noncore portfolio by 2030, building on the roughly $2.9 billion of monetisations announced and $1.6 billion completed in 2025. Capital returns are anchored by a $500 million buyback program and a dividend framework that combines ordinary payouts tied to New Keppel performance with special dividends linked to gross monetisation value. Operationally, Sakra Cogen is slated to begin operations in the first half of 2026, Infrastructure enjoys long-term visibility with about two-thirds of power capacity contracted for three years or more and $7.1 billion of long-dated supply contracts, and management expects spark spreads to stabilise. In Connectivity and data centers, the company is pushing its >1 GW power bank—which could support around $10 billion of data center FUM—and expects long-term O&M fee streams from the now-live Bifrost cable to bolster recurring earnings.

In summary, Keppel’s earnings call showcased a New Keppel that is delivering strong underlying growth, higher recurring income and substantial shareholder returns, even as legacy and noncore assets blur the short-term picture. For investors, the story is increasingly about the expanding infrastructure, digital and asset management platforms, the march toward $100 billion FUM and rising ROE, set against the execution risks of monetising a large noncore portfolio and navigating market volatility. If management can sustain operational momentum while steadily unwinding legacy exposures, the gap between reported earnings noise and the strength of the core business could continue to narrow.