Keppel's Strategic Divestment of M1 and the Path to Becoming a Global Asset Manager

Keppel's decision to divest its M1 business in 2022 marked a pivotal moment in its transformation from a traditional industrial conglomerate to a global asset manager and operator. This strategic move, embedded within the broader Vision 2030 framework, reflects a calculated shift toward high-growth sectors such as renewable energy, sustainable urban development, and digital infrastructure. By analyzing the financial rationale, valuation implications, and long-term re-rating potential, investors can assess whether Keppel is poised to capitalize on its asset-light model and deliver sustained value.

Financial Rationale: Capital Reallocation and Risk Mitigation

Keppel's divestment of M1 was not an isolated decision but part of a larger portfolio rationalization strategy. Since 2020, the company has generated over $4.6 billion in asset monetizations, with $1.6 billion realized in 2022 alone. These proceeds bolstered a $3.6 billion cash position by year-end 2022, enabling strategic reinvestment in clean energy, digital infrastructure, and sustainable urban projects. For instance, Keppel executed $2.8 billion in joint investments with Keppel Capital, targeting energy and urban renewal assets.

The divestment also aligned with risk mitigation goals. By exiting volatile sectors like offshore and marine, Keppel reduced exposure to macroeconomic and geopolitical uncertainties. A 2022 Group-wide scenario planning exercise underscored the need for operational simplicity and resilience, further validating the decision. The move maintained a healthy gearing ratio of 0.78x (below the 1.0x target) while enabling cross-business unit collaboration, generating $560 million in external revenue in 2022—a 60% increase since Vision 2030's launch.

Valuation Implications: A Re-Rating in the Making

Keppel's post-divestment performance in 2025 has been a testament to its strategic pivot. Shares hit a six-year high of S$8.74 on July 31, 2025, closing at S$8.47—a 3.5% gain. This rally followed a 24.2% year-on-year net profit increase to S$377.7 million for H1 2025, driven by its real estate and infrastructure segments. Analysts, including Citi Research, have maintained “buy” ratings, citing a target price of S$9.38—a 14.7% premium to the July 30 closing price.

Valuation metrics further highlight Keppel's undervaluation. Its Price-to-Earnings (P/E) ratio of 17.8x in 2025 is significantly lower than the peer average of 48.1x and the US Chemicals industry average of 24.8x. Analysts estimate an intrinsic value of $0.78 for Keppel Infrastructure Trust (KPLI.F), while the current trading price of $0.27 suggests a 65% discount. This gap, coupled with a 15.4% Return on Equity (ROE) in H1 2025, underscores the potential for a re-rating as the market recognizes its asset-light model and recurring income streams.

Long-Term Re-Rating Potential: Vision 2030 and Beyond

Keppel's ambition to grow funds under management (FUM) to $200 billion by 2030 is a critical catalyst. As of June 30, 2025, FUM had already reached $91 billion, with asset management fees hitting $195 million in H1 2025. The company's focus on monetizing $14.4 billion in non-core assets—legacy offshore and marine holdings, residential landbanks, and logistics assets—frees capital for high-conviction investments.

The Infrastructure Division, now 76% of net profit, has demonstrated resilience. A 7% year-on-year EBITDA increase to $405 million in H1 2025, driven by long-term contracted power generation capacity, insulates the division from short-term volatility. Additionally, Keppel's 1 GW power capacity expansion by 2026 aligns with decarbonization trends, positioning it as a leader in sustainable energy.

Investment Thesis: A Compelling Case for Accumulation

Keppel's strategic clarity, disciplined capital allocation, and alignment with global megatrends—sustainability, digitalization, and infrastructure—make it an attractive long-term investment. The $500 million share buyback program and 15.0 cents per share dividend reinforce shareholder returns, while its asset-light model ensures operational agility.

However, risks persist. The success of Vision 2030 hinges on the execution of $10–$12 billion in non-core asset monetizations by 2026 and the ability to scale asset management operations. Investors should monitor progress on these fronts, as well as macroeconomic headwinds that could impact infrastructure demand.

Conclusion

Keppel's transformation from an industrial legacy to a global asset manager is well underway. The M1 divestment was a catalyst, but the broader Vision 2030 framework—underpinned by capital efficiency, risk mitigation, and strategic reinvestment—positions the company for sustained growth. With a compelling valuation gap, strong earnings momentum, and a clear path to $200 billion in AUM, Keppel offers a rare combination of defensive resilience and offensive potential. For investors seeking exposure to the infrastructure and asset management sectors, Keppel's current discount to intrinsic value presents a compelling opportunity.