Keppel Ltd.'s H1 2025 Performance: A Strategic Deep Dive into Growth Drivers and Future Outlook

In the first half of 2025, Keppel Ltd. has emerged as a standout performer in Singapore's corporate landscape, delivering robust financial results that underscore its strategic transformation into a global asset manager and operator. With a net profit of S$513 million from continuing operations in H1 2025—a 7% increase over the same period in 2024—Keppel's performance reflects a blend of operational resilience and disciplined capital allocation. This article examines the key drivers behind its success, evaluates its efficiency in deploying capital, and explores the implications for long-term investors in a market marked by volatility and shifting priorities.

Operational Resilience: A Foundation for Sustained Growth

Keppel's operational resilience is anchored in its ability to generate stable, recurring income while navigating macroeconomic headwinds. In H1 2025, recurring income accounted for 76% of net profit (excluding legacy offshore and marine assets), up from 76% in H1 2024. This consistency is largely driven by its asset management and infrastructure segments, which together form the backbone of its recurring revenue model.

The Infrastructure Division, in particular, has been a standout performer. Its EBITDA rose by 7% year-on-year to $405 million in H1 2025, fueled by an asset-light approach and long-term contracted power generation capacity. With 71% of its contracted power generation capacity locked in for three years or more, the division is insulated from short-term market fluctuations. Additionally, Keppel's pipeline of new power capacity—such as the 600 MW Keppel Sakra Cogen Plant—positions the company to capitalize on decarbonization trends and rising energy demand.

The Real Estate segment also contributed meaningfully to H1 2025 results, with improved performance driven by strategic divestments and cost-saving initiatives. Annual cost savings of over S$50 million since 2023, on track to meet a S$60–S$70 million target by 2026, further bolster margins. These savings are reinvested into high-growth areas, such as data center infrastructure and renewable energy projects, ensuring alignment with long-term market trends.

Capital Allocation Efficiency: A Blueprint for Shareholder Value

Keppel's capital allocation strategy has been instrumental in its strong H1 2025 performance. The company's focus on asset monetization and reinvestment into high-impact opportunities highlights its agility in optimizing returns. To date in 2025, Keppel has secured $347 million in asset monetization, with an additional $550 million in real estate divestments in advanced negotiations. These actions not only free up liquidity but also allow the company to redirect capital toward sectors with higher growth potential.

The Asset Management segment exemplifies this efficiency. Funds under Management (FUM) grew by 55% year-on-year to S$85 billion at the end of June 2024, with asset management profit more than doubling in H1 2024. The recent $2.0 billion in capital commitments for flagship private funds further underscores Keppel's ability to attract and deploy capital effectively.

Shareholder returns remain a priority. An interim cash dividend of 15.0 cents per share, to be paid in August 2024, reflects the company's commitment to distributing earnings even as it reinvests in growth. Historically, Keppel has maintained a consistent dividend policy, with a yield averaging 4.7% over the past two years. This balance between reinvestment and distribution is a hallmark of its capital allocation discipline.

Future Outlook: Navigating a Shifting Market

As global markets grapple with inflationary pressures and energy transition challenges, Keppel's strategic focus on recurring income and asset-light operations positions it as a resilient long-term play. The Infrastructure segment's pipeline of 1 GW of new power capacity—set to come online by 2026 and 2028—ensures a steady revenue stream, while its expansion into decarbonization solutions aligns with regulatory and consumer demands.

However, risks remain. The real estate sector's exposure to interest rate volatility and the legacy O&M assets' potential drag on earnings could pose challenges. That said, Keppel's proactive cost-cutting and asset rationalization efforts mitigate these risks, as evidenced by the doubling of net profit (including legacy assets) in H1 2025 due to reduced losses.

Investment Implications

For investors, Keppel's H1 2025 results present a compelling case. The company's strong recurring income, efficient capital allocation, and strategic alignment with decarbonization and digital infrastructure trends make it a resilient choice in an uncertain market. While valuations may appear stretched given its 9.8% annualized Return on Equity, the combination of earnings growth and shareholder returns justifies a long-term hold.

In conclusion, Keppel Ltd. has demonstrated the operational and strategic agility needed to thrive in a shifting market. By prioritizing recurring income, optimizing capital deployment, and maintaining a disciplined approach to shareholder returns, the company is well-positioned to deliver sustained value—a critical factor for investors seeking stability and growth in 2025 and beyond.