Keppel Corp Ltd Ord

Good morning, ladies and gentlemen. Welcome to the conference for Capital Limited's first half financial results for 2024. We have on the panel this morning, from your left, Mr Manjot Singh Mann, CEO Connectivity and CEO M1, Mr Louis Lim, CEO Real Estate, Ms Christina Tan, CEO Fund Management and Chief Investment Officer, Mr. Lo Chin Hua, CEO, Mr. Kevin Cheung, CFO, and Ms. Cindy Lim, CEO, Infrastructure. We will begin the session with presentations by CEO, Mr. Lo Chin Hua, and CFO, Mr. Kevin Cheung, followed by the question and answer session. Mr. Lo, please.

Good morning, everyone. Keppel continued to make encouraging progress towards our Vision 2030 goals in the first six months of 2024. Reflecting our transformation to be a global asset manager and operator, our earnings from the asset management business more than doubled year-on-year to $75 million in first half 2024. while funds under management rose 55% to $85 billion since end December 2023. This was the result of both stronger performance by our private funds and listed entities, as well as the successful acquisition of Amon Capital in April 2024. Amidst the challenging macro environment, we continue to press forward with our asset monetization plans, announcing about $280 million of divestments in first half 2024. This brings us to over $5.6 billion in asset monetization announced since October 2020, not including the divestment of platforms such as capital offshore and marine. We remain focused on working towards our interim monetization target of $10-12 billion by the end of 2026. Asset monetization is a key pillar of our Vision 2030 goals, and we will look for opportunities to re-accelerate this when market conditions improve. We have also reaped substantial synergies as one integrated company mainly from amalgamating and optimizing the company's centralized functions, as well as digitalizing our operations. Since embarking on Project Darwin at the start of 2023, we have achieved an annualized run rate of over $50 million in recurring cost savings, on track towards our target of 60 to 70 million by end 2026. Our business processes have also been streamlined and we can explore more automation as we further digitalize. Machine learning and AI are very much part of the new capital as we look for areas to improve efficiencies, provide insights and enable our investment processes as well as operations. In second half 24, we will continue to focus on running a tight ship as we pursue our transformation goals and growth initiatives. In first half 24, we achieved a net profit of $513 million from continuing operations, excluding the effects of the legacy offshore and marine assets. This is 7% higher than $481 million recorded in first half 2023 on the same basis. All segments were profitable, with strong improvements in performance by our infrastructure and connectivity segments, offsetting a decline in real estate contributions. The losses from the legacy O&M assets relate to the impact from Citrum shares held in our segregated account, the asset co-vendor notes, as well as contributions from capital stakes in Flotel and Dynamag, the latter of which was divested in May 2024. Including the effects of the legacy O&M assets, net profit from continuing operations in first half 2024 was $304 million compared to $445 million in first half 2023. To give a clearer picture of our progress as an asset manager and operator, I will, for the rest of this presentation, refer to our financial performance from continuing operations as the new capital. This will exclude the effects of these legacy O&M assets that will be sold over time. Continuing operations do not include the $3.2 billion profit from discontinued O&M operations when we divested this business in 2023. For first half 2024, we achieved an annualized return on equity of 9.8% compared to 8.7% in first half 2023, on the back of our efforts to drive capital-efficient growth. As at the end of June 2024, our adjusted net debt to EBITDA remained at a healthy 3.7 times. About 63% of our borrowings were on fixed rates with an interest cost of 3.79% and a weighted tenor of about 3 years. We'll continue to be prudent and nimble in capital management, keeping our cost of funds competitive amidst the volatile landscape. As at the end of June 2024, we had total assets of $27.7 billion on our balance sheet, compared to $32.3 billion as at the end of 2021. Over the same period, our FUM has more than doubled to $85 billion and is generating attractive fee income at an annualized fee-to-FUM ratio of 55 basis points. Our asset-light strategy is bearing fruit. We have shown our increasing ability to do more with less, pursuing growth while also rewarding our shareholders well. In appreciation of the support and confidence of our shareholders, the Board of Directors has approved an interim cash dividend of $0.15 per share for the first half-24. The interim cash dividend, which will be paid to shareholders on August 23, is the same as last year's interim dividend of $0.15 per share, reflecting the Board and management's confidence in Keppel's growth trajectory. Our recurring income rose 14% year-on-year to $388 million in the first half of 2024, making up about 76% of our net profit compared to about 71% in the first half last year. The improved recurring income was boistered by higher contributions from both asset management, which more than doubled to $75 million year-on-year, as well as stronger operating performance in infrastructure and connectivity. Our infrastructure division continues to register strong improvements in its integrated power business, securing higher contracted loads with longer durations whilst optimising its operations. At the end of June this year, About 60% of our contracted generation capacity was locked in for three years or more. The division has also actively expanded its long-term technology solutions and energy services contracts, which grew over 20% in the first six months of this year to $5.2 billion by the end of June 2024. First half 2024 was a busy period for our asset management business as we doubled down on our growth initiatives. We raised about $435 million in equity and completed $2.3 billion worth of acquisitions and divestments across our listed REITs, business trusts and private funds. We also achieved the first close for our flagship HACER fund, bringing the total FUM in our Sustainable Urban Renewal Strategy to over US$1.7 billion. In the first six months of 2024, asset management fees grew to $203 million, up by about 75% year-on-year, mainly due to the improved performance of our private funds and listed vehicles, and with the inclusion of Amon. With an increased FUM of $85 billion, we are close to our halfway mark of $100 billion by end 2026, which we are confident of achieving as planned or even earlier. With a combined dry powder of about $25 billion, we are in a good position to seize opportunities to acquire attractive assets that may become available when markets go through dislocations. Between Keppel and Ammon, we are also concurrently pursuing an extended deal flow pipeline of $27 billion. Looking ahead, investors are expected to remain highly selective of investment strategies and asset classes that can provide steady cash flow, long-term returns and portfolio diversification. This continues to augur well for capital's strength in alternative real assets which are underpinned by resilient macro trends such as the energy transition, climate action and digitalization. In addition to growing our existing flagship funds, we have also been fielding good investor interest for three new funds for data centres, education assets and private equity, which we plan to launch later this year. On the back of robust investor demand for Keppel's data center offerings, we are hopeful of achieving the first close for our third data center fund with a target size of US$2 billion later this year. Our deep value-added strategies coupled with the proprietary expertise to develop and operate many of these critical real assets put capital in a strong position to create alphas for our private funds. We can provide further channels of liquidity to our limited partners through our listed real estate and infrastructure trusts, which will in turn benefit from the extended pipeline of high-quality assets. We are pleased to have Amon on board as our European real estate platform, following the completion of our acquisition of an initial 50% stake in April this year. Amon currently has five flagship funds, including Fund 5, a continuation fund, in which Keppel has a share of the carry. Amon continue to perform well, boasting stronger financial performance in first half 2024, compared to our initial projections. On an FUM of over $25 billion, Amon achieved an annualized fee-to-FUM ratio of about 50 basis points. Amon remains focused on deploying Fund 5 well. With substantial dry powder from their Euros 3.8 billion Fund 5, Amon is well positioned to seize opportunities in the European markets. Meanwhile, together with AMON, we are in the early stages of working on a separate sleeve in data centres for Europe. We will share more details on this initiative in due course. In our operating platform, infrastructure continues to be an exciting space as we capture growth opportunities amidst the rapidly evolving energy transition landscape. Our infrastructure division is enhancing the performance and resilience of the Kepo Melimau co-gen power plant by upgrading its second gas turbine. The first turbine was upgraded successfully a year ago. Together with the new and advanced high-efficiency Kepo Sakra co-gen plant, which will come on stream in early 2026, Keppel's power generation fleet will be the best in class in Singapore and the region. Our Keppel-led consortium has also been shortlisted in a closed request for proposal by the Singapore authorities to carry out the pre-feed for low or zero carbon ammonia power generation and bunkering solutions on Jurong Island. Beyond Singapore, we have also announced a collaboration with Japan's Sojits Corporation, to jointly pursue decarbonization and clean energy business opportunities in the Asia-Pacific. Currently, our long-term technology solutions and energy services contracts produce an EBITDA of more than $40 million per annum. We see a huge addressable market for us to expand our energy, cooling and decarbonisation solutions both here in Singapore and overseas as well. Our target is to expand this recurring business to one that can generate more than $100 million in EBITDA contributions a year by 2027. In real estate, we continue to gain traction in offering asset-like real estate as a service solutions. Our real estate division is currently implementing SIR solutions across a pipeline of six projects with a combined asset value of $3 billion. This includes the announced acquisition of One Paramount in Chennai, where our SIR asset enhancement initiatives will raise its sustainability performance and also improve rentals, drive down operating costs and provide an uplift to both net operating income and the assets value. We plan to create a fund to tap the interest of investors in the Indian office market, where developments such as One Paramount would be a potential seed asset. In China, we are also providing larger-scale green and smart city consultancy services to Suzhou Industrial Park and the Sino-Singapore Corporation Zone in Jinan, Shandong. In our connectivity division, reflecting TAPL's commitment to green data centres, While also delivering strong returns, our latest data center, Capital DC Singapore 8, or SGP8 for short, has achieved the BCA Greenmark Platinum Award. The second of three planned buildings in the Capital Data Center campus at Genting Lane, SGP8 is fully leased to clients from across the cloud services sector, internet, enterprise and telecommunication sectors and is expected to be ready for service in phases starting from the third quarter of this year. The division is concurrently working with authorities to finalise details of the first floating data centre module in Singapore. We expect to take the final investment decision in the second half this year. Meanwhile, M1 continues to make good progress growing its enterprise business. In the consumer business, having substantially completed the customer migration to its new cloud-native digital platform, M1 is now progressively decommissioning its legacy tech spec, which, when completed, will boost customer acquisition and lower its cost to acquire and serve. To conclude, while 2024 continues to be challenging, we see exciting opportunities ahead as investors' growing preference for defensive cash flow generative assets is driving demand for alternative real assets in infrastructure, connectivity, and private credit, areas where capital has strong expertise. Drawing on our deep domain expertise and operating capabilities, We will continue to build on Keppel's unique value proposition to drive stronger returns for our limited partners and greater value for our shareholders. Our CFO, Kevin, will now take over. We'll take you through details of the company's financial performance. Kevin, yeah.

Thank you, CEO, and a very good morning to all. I shall now take you through Capo's financial performance. For first half 2024, Capo's net profit was $304 million as compared to $3.6 billion in first half 2023. First half 2023 included $3.2 billion of profits from discontinued operations, mainly due to the gain on disposal of Capo Offshore and Marine of approximately $3.3 billion. Excluding discontinued operations, net profit was $304 million as compared to $445 million in first half 2023. The lower year-on-year results was largely due to higher net loss from legacy offshore and marine assets amounting to $209 million. This arose from fair value losses on the remaining CETRM shares in our segregated account as compared to gains in first half 2023, as well as a higher share of loss from an associate. For context, around 60% of our holdings in Citrum shares will monetize in 2023 at an average price of around $2.60. In first half 2024, we also recognize higher financing costs and amortization of day one fair value loss on notes receivables as the asset co-transaction was completed at the end of February 2023. In the next few slides, I will present the financials excluding the effects of legacy O&M assets. so as to provide greater clarity on the financial performance of the new capital as a global asset manager and operator. Net profit for the first six months of 2024 improved 7% to $513 million from $481 million in first half 2023. All three segments were profitable with better performance in infrastructure and connectivity segments. Analyzed ROE increased to 9.8% in first half 2024 from 8.7% in first half 2023. I will further elaborate on the performance of each segment later. Adjusted Net Debt to EBITDA was 3.7 times as at end of June 2024 as compared to 3.3 times as at end 2023. This was mainly due to increase in net debt as a result of dividend payments, investments, and additions of fixed assets and investment properties, partly offset by divestments during the period. Free cash flows was $216 million as compared to free cash outflow of $732 million in the same period last year. In first half 2024, there was lower net cash use in operating activities driven by healthy operational cash flows and lower working capital requirements. Net cash use in investing activities was also lower in the current period as first half 2023 saw a net cash outflow arising from the divestment of COMP. First half 2024 net profit was supported by positive contributions from all income streams. Underpinned by robust asset management earnings, as well as stronger operating performance from infrastructure and connectivity, recurring income grew 14% to $388 million from $340 million in the same period last year. Valuation gains of $167 million was higher compared to $22 million in the prior year, supported by higher fair value gains from investment properties in Singapore. Development and EPC earnings were lower year on year, mainly due to a decrease in profits from trading projects in Singapore and China. Due to lower asset monetization, gains from capital recycling decreased by 12 million. Net loss from corporate activities was higher than that of first half 2023, mainly due to lower net interest income and higher share plan expense. Moving on to segmental performance. The infrastructure segment achieved a net profit of $363 million in first half 2024, 25% or $72 million higher than the $291 million in first half 2023. This was led by strong asset management earnings growth from $4 million in first half 2023 to $44 million in first half 2024, mainly due to fees from better performance achieved by Capital Infrastructure Trust, which is managed by Capital, acquisition fees in relation to KIT's acquisition of a German solar portfolio and an Australian transportation business, as well as higher management fees earned during the period. Our integrated power business continued to deliver robust operating income growth, driven by higher contracted spreads. This was partly offset by lower contributions from an associated company in Europe and lower distributions from KIT. The segment also recorded fair value gains from its sponsor stakes in the infrastructure private funds in first half 2024. Amidst challenging market conditions, real estate recorded a net profit of $129 million, 31% lower than the $186 million in first half 2023. Asset management net profit was comparable year-on-year, arising from stable fee revenues, as well as the maiden contribution from Amon Capital, which was offset by high overheads. The decline in operating income was a result of higher interest expense and lower contributions from our sponsor stakes, mainly in capital REIT partly due to our reduced unit holding interest following the dividend in specie paid out to capital shareholders in November 2023. Valuation gains to $112 million higher, largely from fair value gains on investment properties in Singapore, partly offset by share of fair value loss from capital REIT on its investment properties in first half 2024. Development earnings to $140 million lower year-on-year, mainly due to a decrease in profits from trading projects in Singapore and China. As compared to first half 2023, which had benefited from unblocked sales of projects in India and Vietnam, there were no divestment gains recognised in first half 2024. Net profit from the connectivity segment of 76 million was more than double 37 million recorded in first half 2023. Asset management net profit was higher year-on-year, mainly due to divestments and acquisition fees in relation to Capital DC REITs data center asset in Australia, as well as lower overheads. The higher operating income was a result of higher project management fees and lower overheads. Earnings from N1 were stable year-on-year. The segment also recorded higher fair value gains from sponsor stakes in private funds, as well as higher gains from disposal of non-core assets and a share of capital DC REITs gained from disposal of its data center assets. Net loss from corporate activities was $55 million as compared to $33 million in first half 2023. This was mainly due to lower fair value gains on investments, lower net interest income from corporate treasury operations, and higher share plan expenses in first half 2024. This was partly offset by divestment gains from the sale of non-core assets. With that, we have come to the end of the presentation, and I shall hand the time back to CEO for the Q&A session. Thank you.