With inflation and rates stabilising this year, Keppel believes the environment for fundraising and dealmaking activities to improve, says the company in response to shareholders ahead of its AGM.
"Our unique value proposition as an established asset manager and operator puts Keppel in a strong position with investors who are increasingly selective of strategies and asset classes underpinned by strong macro trends such as those mentioned above," the company says.
With this backdrop, Keppel will be on track to achieve its stated funds under management (FUM) target of $200 billion by the end of 2030. A bigger FUM gives Keppel more recurring income from managing the funds and assets.
As at end 2023, FUM has reached $55 billion and with the first phase of the acquisition of European fund manager Aermont is slated for completion later this year, Keppel's FUM would reach $79 billion, which is around 80% of its interim target of $100 billion by end of 2026.
Keppel believes it can help Aermont grow its FUM by 2.5 times from $24 billion to $60 billion by 2030, through the co-creation of various fund products.
"Apart from the acquisition of Aermont, as well as other possible M&A opportunities, we will also continue to drive organic growth to reach our $200 billion FUM target by end-2030," Keppel says.
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In addition, Keppel plans to tap on its "quality deal flow pipeline" of some $14 billion that has already been identified across its various privately held funds and listed vehicles.
Keppel is planning bigger flagship funds, such as the Keppel Sustainable Urban Renewal Fund, which achieved its first close in April 2024, as well as the Keppel Asia Infrastructure Fund series. Keppel plans to launch its third data centre fund later this year too.
When asked how is Keppel coping with the challenging business conditions in China, the company says it has come up with a new "playbook", shifting its focus from predominantly real estate to other businesses. They include energy transition, infrastructure, sustainable urban renewal and data centres.
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"These are areas aligned to China’s longer-term sustainable development goals, and where Keppel has strong differentiation and value add to create value for both our investors and customers in the long run," Keppel says.
According to Keppel it has monetised over $3 billion worth of assets in China since 2017 and recognised profits of more than $1 billion. It has also repatriated cash of more than $5 billion.
"Some of the unlocked capital is being reallocated to pursue opportunities in different asset classes and countries, leveraging our asset-light model," says Keppel.
One recent bright spot for Keppel is its infrastructure division, which has pivoted to an asset-light and recurring revenue business model, backed by a balanced trading and service portfolio and fee-based income.
As at end last year, about 60% of its contracted power generation capacity was locked in for three years and above.
"We have built up strong long-term contracted revenue for decarbonisation and sustainability solutions, which amounted to $4.3 billion as at end-2023, to be earned over the next 10-15 years. Such contracted revenue typically has indexation and cost escalation pass-through mechanisms," Keppel explains.
"With the many promising opportunities in the infrastructure space, we are focused on leveraging our competitive advantages to not only sustain the segment’s performance, but also grow the contributions over the long run, organically and inorganically," the company adds.
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Keppel is not committing for sure when asked if it can maintain cash dividends at around 34 cents per share level.
In its response, the company recognises that dividends are important to its shareholders, and it has tried to maintain a payout ratio of between 50 and 60% each year.
For FY 2023, Keppel is paying a total of $2.70 which includes in specie distribution of Seatrium shares and Keppel REIT units, on top of the cash dividend of 34 cents.
"We are unable to comment on cash dividends in future. As Keppel advances on its asset-light strategy, we will be less reliant on our balance sheet for growth moving forward.
"Our strategies to grow recurring income and drive asset monetisation would collectively release more funds for investments, to pay down debt, as well as reward our shareholders," the company says.
Keppel shares closed on April 12 at $7.16, down 0.56%.
