Global asset manager and operator, Keppel Ltd. (SGX: BN4) has surged roughly 29% year to date (YTD) on the back of strong business execution.
The question on every investor’s mind is: With secular tailwinds at its back, can the stock power higher, or has most of the upside been priced in?
Why Keppel’s share price has climbed
Keppel’s surge has been driven by its strategic change from a conglomerate business model, previously focusing on capital-intensive industries such as offshore marine and telecommunications, to an asset-light global alternative real asset manager and operator that focuses on digital and green energy infrastructure.
Since this pivotal transformation, the group has been carving out legacy businesses and assets (non-core portfolio for divestment) through sales and divestments.
These proceeds are invested into assets with recurring income streams, focusing on data centres, renewables, and sustainable infrastructure, aligning with long-term growth trends.
Such divestments and recycling of assets have boosted investors’ confidence in the business.
Keppel recently reported steady 1H2025 performance, led by increasing profitability.
While revenue decreased 5% year-on-year (YoY), to S$3.06 billion, net profit surged 24% YoY to S$378 million.
Another bright spot can be seen in the 7.2% YoY increase in recurring income (excluding non-core portfolio for divestment) to S$444 million.
Among its three core segments, Real Estate saw a strong momentum with revenue climbing 45% YoY to S$95 million and positive net profit coming in at S$98 million due to higher asset management fees from new funds, lower costs and financing expenses, fair value gains, and a gain from the partial disposal of Saigon Centre Phase 3.
Infrastructure continues to be a core pillar for Keppel, despite seeing revenue decline 12% YoY to S$2.0 billion (65.7% of total revenue), and net profit also decreased 5% YoY to S$346 million owing to lower asset management fees contribution from Keppel Infrastructure Trust (SGX: A7RU) or KIT, which was offset by stronger contributions from decarbonisation solutions.
Connectivity saw revenue jump 14% YoY to S$743 million (24.3% of total revenue) while net profit slumped 19% YoY to S$57 million, impacted by lower valuation gains in private funds as well as a one-off forfeiture fee paid by M1.
These results highlight earnings resilience while Keppel continues its transformation process.
Growth drivers powering Keppel forward
Singapore’s Green Plan 2030 targets having 80% green buildings, as well as increasing the solar energy mix to meet the annual electricity needs of 350,000 households by 2030.
This highlights the ongoing energy transition and increasing demand for green energy infrastructure.
Keppel has also been vocal in expanding its asset management platform to deliver steady fee-based income.
As of 1H2025, Keppel has S$91 billion in funds under management (FUM), with S$25 billion undeployed.
On 7 August 2025, the company announced that it secured another S$2.3 billion from institutional investors to invest in data centres, education assets, and sustainable urban renewal.
Keppel’s urban development projects, which span across multiple countries (China, South Korea, Vietnam, Singapore, etc.), comprise different residential and commercial properties, providing the group with a long-term pipeline.
The asset manager also announced a divestment of its M1 telco business to Simba on 11 August 2025.
This transaction will yield approximately S$1.0 billion in cash proceeds, which will be used to pay down debt as well as to invest in growth opportunities.
Risks to monitor
Investors should be vigilant to a variety of risks that may impede Keppel’s performance.
Keppel might face execution risk in pivoting away from legacy businesses.
As the company continues its divestment of its legacy businesses, it might not be able to sell these assets at favourable valuations, which may lead to lower earnings.
Additionally, Keppel is also sensitive to commodity cycles and macroeconomic conditions through its real estate and infrastructure segments.
Higher commodity prices will pressure profit margins and a weaker economy might reduce demand for Keppel’s urban development projects.
Finally, the rising competition in renewables and asset management could threaten Keppel’s asset management business.
Numerous financial institutions are seeking to raise and manage funds for renewables; Keppel must continue to maintain its expertise to ensure steady FUM flows.
These risks are partially mitigated by Keppel’s increasing profitability and its healthy balance sheet.
Overall operating profit margin for the group is 20.2% for 1H2025; operating profit margins for infrastructure improved to 19.2% from 18.2% in 1H2024, while connectivity’s operating profit margin remained steady at 8.3%.
Overall net profit margin for the group rose from 9.4% in 1H2024 to 12.4% in 1H2025, showcasing Keppel’s increasing profitability as it continues its asset-light transition.
Debt remains manageable with net debt at S$9.9 billion as at 30 June 2025, with a net gearing ratio of 0.9 times.
This is supplemented by a non-core portfolio for divestment, which has a carrying value of S$14.4 billion as at 30 June 2025.
A S$0.15 dividend per share has been declared for 1H2025, the same as the interim dividend paid in 1H2024.
This translates to a yield of approximately 3.9% (assuming the 2H2025 dividend of $0.19 per share is the same as 2H2024), at its current share price of S$8.82.
Get Smart: Monitor Keppel’s execution and progress
Keppel’s surge reflects its strong execution.
However, investors must consider whether its growth strategy is reflected in the current valuation at 17.8 times its trailing earnings.
Share price appreciation is still possible if Keppel maintains its momentum while secular tailwinds remain resilient.
Dividend consistency provides added appeal even at higher share prices.
Keppel Corporation’s transition has been successful thus far, but it will require continuous execution.
For investors, the question is, do you believe Keppel can keep compounding value in its new growth pillars?
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Disclosure: Wesley does not own any of the shares mentioned.
