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.

Thanks, Kevin. So we move on to the Q&A session. Of course, open for Q&A, but I'd like to give priority for those of you who make the effort to come down. Yes. You're both from the same bank. You want to decide who goes first. Ladies first.

All right. Thanks, Rachel, for the presentation. I have two questions.

Maybe you can just say your name and where you are.

Pei Hua from DBS. I have two questions. Firstly, this is on the loss for the legacy O&M assets. Is it possible to give us a further breakdown as to how much is for the C-charm shares, for CharDynamic, and then the VendorNotes? Second is on infrastructure. Integrated power business is still very strong, just more than slightly from second half last year. How should we think about the business dynamic ahead?

Thank you for the question. Maybe the first question I'll ask the CFO to respond to.

Thanks for the question, Bill. So just on the breakdown of the $209 million under offshore legacy, offshore and marine, approximately $67 million of that is due to the fair value losses from CETRIM shares. These are relatively volatile. I'll cover that a little bit later on. On the other associates, Flotel and Dynamag was about $34 million, and then the remaining $108 million was the result of the vendor notes interest, vendor notes portion of it. That adds up to the $209 million. Just coming back to the C-Term shares, I mean, it is relatively volatile. I mean, if you look at the closing price, and C-Term shares has done very well over the course of the last couple of weeks, the variance that we're looking at in terms of the $6 million, if you look at the closing price of yesterday, we would have returned back approximately $21 million in terms of the timing of the closing of the price. Okay. Thanks, Kevin.

Cindy, you want to provide some insights?

Thank you, CEO. Thanks, Dehua. I think if you were to compare with second half 2023, as your question alluded to, there's always seasonality when it comes to energy and power performance. In terms of how we look at the integrated power business, Suffice to say that based on the breakdown of our long-term contract that we have secured for the power business, you will see 60% of our contracted capacity is signed on a more than three years' panel. I think this augurs very well because this will give us predictability of future cash flow. The second very important point is beyond the healthy contracted spread that we have secured, we are also very laser focused on improving the operating margin by enhancing the efficiency of our generation units, as well as ensuring high reliability, especially in a very volatile market, you don't want to have reliability issue when it comes to outages. As what CEO presented earlier, we have planned for and will also be embarking on the turbine upgrade comes early next year. This is at the back of a very successful performance of the first turbine upgrade. Such continuous planning and investment behind upgrade of our generation unit will position us very well entering in the quarters ahead. Thank you.

Thanks, Cindy. I think Derek, you were next.

Morning, Chin Wah. Derek from DBS. I got three questions. The first one is on earnings. I'm looking at your asset management revenues for real estate. It has a nice jump, but on a profit side, it appears quite flattish. I'm just curious whether... With the contribution from Amon, how does it look like from the profit angle? Is there any one-offs that we should be aware of? If not, the cost appears quite high on the other side. The second question is on, could you give us some colour on your size of your data centres, AUM, both from the private fund side, and do you have any ambitions that you can share in terms of growth in terms of AUM? I know you're doing a lot of stuff there. then if you can give us a growth target, it would be helpful. My last question is on Genting Lane Data Centers. I think it's TOP-ing nicely. Just wondering whether, you know, is it time that you should be thinking of monetizing that? Thank you.

Thank you, Derek. Can I invite Christina to address?

Hi, Derek. Morning. With regards to our asset management revenue, the contribution from RE, I think from AMONT, I think we have talked about in terms of revenue is about $30 million because we only recorded since April of this year when we closed. So it's only for three months. And then for the profitability, we actually also netted off amortization because it's like accounting. I mean, in accounting terms, you have to apply some amortization to the business that you have acquired. So it's not just pure profits. It's actually the net profit less amortization. Yeah. With regards to data center, I think we have actually run very successfully on the first fund and second fund, so that both funds would actually be roughly AUM about $5 billion. So now we're looking to raise the third fund. We set a stated goal of $2 billion in terms of equity. in U.S. dollar terms. So that would be probably another 10B from here. So I think the data center space is increasingly becoming very attractive. It's one of the hottest sectors right now. Most of the investors are actually also chasing for it. So even before we actually finish all documentation to prepare for the data room, we have a lot of investors actually waitlisting and then asking us, like, when can we go into your data room? So there's a good interest, I think, in the funds itself. On Jiras, on divestment, I mean on the asset in Genting Lane, I think the team is always looking at maximizing it for the private funds, and then at the right time, we will look to exit to the data center. Thank you.

Maybe just to supplement a bit on what Chris has said, I think if you look at the three sectors that we have, we are getting very good tailwinds on infrastructure as well as connectivity. But the real estate side is still facing some headwinds. So in terms of acquisitions for real estate, we have not been as quick because we are waiting for the bid-ask spread to narrow. So as a result of that, the cost side is still there because we have overhead costs. But on the revenue side, quite a number of the deals have been pushed to the right. And so we expect that as deals close in the second half and in next year, we will expect the profitability on the RE, FM and I to improve. on the data center side, I think what Chris said is quite right. There's a lot of tailwinds there, a lot of interest. There are also quite a number of folks now coming into the space. But I think where Keppel kind of stands out is that, you know, we have a very strong operating capabilities on the data center side. We have, you know, we're not just doing powered shelves, but we can actually do equipping, and we have a long track record of operating these data centers very well for the customers. And for the customers, these are all mission-critical assets, so they need to make sure that the operator is strong. And then, of course, now increasingly data centers is also about power, and increasingly it's about green power. So whether it's cooling, green power, that's where I think infrastructure side can also come in. And so that's the uniqueness about capital, how we are able to differentiate ourselves vis-a-vis our peers. Sorry, Asuki, you had a question.

Hi, I have quite a fair bit of questions. I'll just go through segment by segment.

For infrastructure... Maybe you do two or three first because I can write now. Then I'll come back to you again. We answer the questions and then... So I'll just ask three first.

For infrastructure, why is the associate line in infrastructure so weak? Because it's a loss? And also, I guess you might answer on why is DCAP a solution? Because compared to the past two halves, profits were about $50 million, but this half is significantly lower. And in terms of floating data center, I know that you hope to achieve FID by second half this year, but would you be able to share the capacity and also the CAPEX plan? Maybe just finish off on infrastructure. The spread that you are actually closing, half and half, how does it actually compare? First half versus second half.

Maybe I ask Cindy to answer the question one and three.

If you are referring to the co-investment and sponsor stake, you're talking about the negative, it should be read in parallel with the valuation column because we do have some co-investment stake and a sponsor stake which are, shall I say, accounted differently under this fund. So it should be read in conjunction with the valuation column as well. On the second question regarding the associate weaker performance, I think that is one of our investments, one of our associates in Europe. There's some seasonality in earnings, in particular when you look at the renewable sector, half and half is not a good comparison. In terms of contracted spread for the integrated power business, suffice to say it is healthy, but it is also very challenging. So we remain, like I said earlier, very focused on managing it at a portfolio basis in terms of tenure of the contract as well as the quality of the customer that we are working with. You would have also been aware that there are customers that, for example, a Grover Foundry, we sign long-term, 15 years PPA, big into the contract. There are other value-added services that we bring to the customer beyond just selling power.

Thank you, Cindy. So, Suki, your second question is actually connectivity. So we have been working on this floating data center module for a bit of time now. It's quite innovative, so it takes a bit longer to get all the approvals. But happy to say that we are quite close to getting all the approvals, in which case we will expect to get a final investment decision in the second half. We have not disclosed the power of this module. But we are in very advanced discussions with a hyperscaler who will probably take the entire capacity. Next question? Yes.

Hey, morning, Shiva. I'm Brandon from Citi. Just have a few questions. Basically, first one on China. I think if you look at the business for you, the operating income sign has been quite negative for a few periods now. Do you have any new strategy there in China, given what we are seeing in the market? It's been slow. It's hard. We know. That's my first one. My second one would be more on the... this is your pipeline, right? You have sort of doubled it to $27 billion. Any chance of letting us know the conversion rate of this $27 billion? And also the last question would be, do you have any optimal contribution level from asset management? So we saw in this half year that they contributed close to 20% of your recurring, pardon me. Thanks.

Okay, I will try and address your first and third question and then maybe ask Chris to talk on the pipeline or give some colour on the pipeline conversion. First and foremost, China is quite complex. It's obviously going through some difficult challenges at the moment, both for its economy and also on the real estate market as well. But if you look at the longer term, medium to longer term, I think it is still a market that we strongly believe in. We think that there's still a lot of opportunities there. You will recall that last year we announced that we have revised our playbook for China, moving more towards what we believe China needs today compared to what it was before. And more importantly, areas where capital can actually make a positive contribution. So this would be in areas like energy transition, data centres, etc. And you would have seen that we just recently announced Energy as a Service, which is our kind of a breakthrough contract with Perennial in China. So we are starting to embark or starting to execute on this new playbook. But it takes time. So it's not going to just happen overnight. But what is also useful for us is that, or what has been extremely helpful for us is that we have actually started to de-risk our portfolio on China for the last few years. As you know, we have actually sold about $3 billion worth worth of land bank booking about a billion dollars in profit in the last few years and also more importantly we've also taken back about five billion renminbi that used to be there where we parked it there because we were actively buying land but since we are no longer actively buying land we brought it back So I think we have kind of derisked from China, so we are now executing on this new playbook, and we see good opportunities. So I think that's kind of where I would leave it. Maybe I'll ask Chris.

On the pipeline itself, together with Amons, we are actually looking at quite interesting deals. I think Amons has been spending a lot of time looking at new platforms in Europe, and they have been very successful in executing those strategies. resulting in some of them reaching 10x the last time where we disclosed about it, their performance. So I think in terms of Amon's acquisition pipeline, we are quite close. We are looking at those dues where there is more than 50% chance of conversion because they have actually cleared these through the IC itself as well as our pre-due kind of approval process. With regards to the rest of the group, we are looking at deals in infrastructure. It's more global play as well, and we are looking at things where we are playing to our strengths. Actually, yesterday we just signed another deal for infrastructure. It's part of our ecosystem that we're looking at for digital infrastructure. So I think we are looking at things where actually Capo has very unique strengths and positioning in terms of creating value for the various platforms that we're looking at. In terms of our data centres and connectivity divisions, I think data centres, we are also starting to look at platforms besides asset acquisitions. I think we've just announced some in Japan. We'll continue to explore more in some of these countries as well. We're seeing a lot of good collaboration between us and our partners in Japan as well. I think real estate, besides the office platforms or office assets, we're looking at things like education sectors. So we've been getting a lot of investors' interest in that area, as well as getting very good traction talking to the international schools and operators, which actually the education assets generate really high yields compared to most sectors. We're looking at 7% yield on cost and all that, even in countries like Japan. So I think this is a very interesting sector because we are one of the first early movers in this area. We are also looking at living sectors now going forward, whether it's multi-family, student housing. Because of our close ties with the international operators, a lot more deal flows became available as well. So together of all this, most of these deals would have cleared initial pre-IC.

Okay. Your third question, thanks, Chris. Your third question was on the contribution or what's the projected or ideal. Is it ideal, isn't it? Ultimate target. Actually, you know, how I do it is as high as possible, right? But I think what's more important is to look at how this whole business model of ours works. On the asset management fees, Chris has mentioned that we have a lot of new funds that we are raising. We had some... More difficult time raising money, I think, a year ago, but I think along with everyone else. But I think now we're starting to see good traction. So as we raise more funds, and more importantly, as we deploy the funds, then we will see the contributions from asset management fees and profit will grow. So as we grow from what it is currently, now it's 85, we hit 100 and ultimately 200, then I will expect the asset management fees to grow. And you can, assuming that we achieve our so-called, retain our 55 basis points on FUM, you can work out the numbers. But what's also important is that as we grow this funds under management, it also creates space for our operating division. Because as we build more Bifrost, we build more hydrogen-ready power plants, it will create opportunities on the operating division. And we're no longer tied to our balance sheet for growth. So which means that as we monetize, we are more able to provide, you know, to reward our shareholders going forward. So I think the model is working out well as intended. And I think given where we sit here, you know, Darwin, day one was six months ago or seven months ago. I think we make good progress, but I think this model is definitely something that we'll continue to execute on.

I just want to follow up on what Christina said on this IC approval and all, right? So can I assume that 50% chance of going through means we should see like, what, 13, 14 billion of this 27 billion panning out? Yeah.

I think in terms of the deals, we find it attractive enough to clear the IC just pre-approvals, but we will still have to follow through with our due diligence and negotiations with our partners. So I think we are quite rigorous in terms of our underwriting and in terms of our negotiations, making sure that it's the right deal and making sure that it's good cash flows for our investor base. So I mean, there's a good chance of conversion, but I guess it has to tick all the boxes as well.

So this is also something that I think is important. Whilst we do see this as a way for us as we increase, as we buy more or we do more acquisitions, we create more fees. But at the same time, we have to be mindful that, as what Chris says, we must always be looking after the interests of the investors. So we only do deals that we think checks all the boxes, makes sense, fits the funds strategy, the risk reward is there. Because ultimately, we also have to look very closely at making sure that our investment performance continues to be good. Because when you have good investment performance, then there will be more capital that will come. So I think this is kind of short-term versus long-term. We want to do deals. We are very active. I think there's a very strong pipeline. We believe we can convert a significant part of that, but ultimately we'll have to be dependent on competition for the deals and making sure that the deals are the right deals that we are going to do for the funds and for the REITs that we run.

Hi, it's Mayank from Morgan Stanley. Yes. Just a bit of a question around the EBITDA growth target that you talked about from going from 40 million to more than 100 million per annum on the power side. Can you just give us a bit of a building blocks in terms of how we are getting there, like whether it's efficiency, whether it's more than that to it? And I think the second question was more in terms of capital allocation now. you kind of touched earlier a bit on this, but like when you look at now going forward, I think you had a cash outflow even for the first half right now. So when do you see that free cash flow positive at the capital level kind of coming through? Can we expect that in the second half this year? Thank you.

I think the first question, it's probably not really power sector, it's really some of the new areas that we're in, but I'll ask Cindy to address that.

Yes, indeed. It is not the power business. We call it our Engine 2, which is the decarbonisation and sustainability solutions platform. You have seen in the past few quarters, we have deliberately shared the long-term contract that we have secured in provision of solutions and services related to decarbonisation and sustainability. This includes energy as a service, such as providing cooling to space and premise owners, solarisation of rooftops, as well as EV charging infrastructure. On top of that, also providing technological solutions for sophisticated and advanced waste treatment facilities, And of course, this includes essential services for operation and maintenance of waste to energy plants, water treatment plants. So this long-term contract has grown pretty interestingly in the past few quarters. And today, as you see, year to date, we have grown it by a further 20% to 5.3 billion of secured contracts to be delivered over the next 10 to 15 years. This will over time translate to EBITDA. And this is where we are very confident that the EBITDA growth by 2027 would be more than 2.5x. So our target is about 100 million from this engine too. I hope this answers your question.

Okay. Thanks, Cindy. Mayang, on your second question on capital allocation, we don't really allocate capital in the traditional way like, say, someone like a sovereign wealth fund or a pension fund. But certainly, I think we do keep a very close watch on the cash flow, cash inflow and cash outflow. I think if you look at the first half, I think both infrastructure and connectivity was positive. But real estate was a bit negative. So there are some challenges there, as I've highlighted. I think we will, you know, obviously look for the right opportunities to re-accelerate our monetization. I think that is, as I mentioned in my speech, that is a very key platform that our Vision 2030 is on, is anchored on, and we will need to, you know, find the right So currently, I think on the real estate side, I think Louis and his team is looking at some asset monetization opportunities in Singapore and in Vietnam. China is tough, but we're looking at Singapore and Vietnam. So I think we will definitely be keeping an eye on that. If you don't mind, those people, can you wait a second? I'd like to address some of the questions online from the very patient retail investors that have called in to post some questions. I'll come back to the audience here. First question is from Nicholas Lim, a retail investor. Nicholas says, congratulations on the commendable results for continuing operations profits. He has two questions. First question, what is your direction on the sustainability of capital's $0.34 per year dividends? So he's referring to $0.15 from this year, April. This year, I suppose, or last year, and $0.19, the final dividend, will it be a level you will absolutely defend? So first and foremost, Nicholas, we know that dividends are quite important. And as we see, most of our earnings are becoming increasingly recurring. it gives us more confidence in terms of declaring dividends. But I cannot predict what the next second half will be. Certainly, we are aware that dividends is important. And you can see from our track record, we have been quite aware that it is really about total shareholders' returns. So it's about... not just about share price performance, which is important obviously, but also in terms of what we can distribute in terms of dividends and special dividends. Second question Nicholas has is, given gearing has been inching up to 0.94 currently, will dividends be cut to par gearing or is management very comfortable with the gearing of 1.0 as previously mentioned? So first and foremost, we are now saying, hey, look, our business model has changed. You can see again that, you know, compared to, say, five years ago, our recurring income is now actually quite a significant part. Last year was 88% for the whole last year. This year, I believe, is in the 70s for the first half. So we changed the model. So we are not really looking so much at net gearing, although I know that that's something that some analysts continue to focus on. We believe that a more appropriate measure would be to look at the net debt to EBITDA, which is currently at 3.7 times, which is, we believe, quite comfortable. We believe that we are quite comfortable with the interim dividend. That's why we declared it. And we also bear in mind what we see for the rest of the year. But of course, nothing is for sure, but based on what we can see. So we are quite comfortable paying that $0.15 interim dividend. Second question is from E. Tian Chow of AMAT Singapore. Can you help provide more information with regards to the O&M asset monetization progress? Why not dispose it earlier than later as the capital can be deployed to more productive users? Completely agree. I think this is something that we are very focused on. How do we monetize this sooner rather than later? I think maybe a few results briefings ago, someone asked me how much profit we can make from this. And I think my reply then and my reply now is our focus is really on monetization. If we make some profit along the way, you know, that's a bonus because this is legacy assets. This is not our core business. So our goal is to monetize as soon as we can. But having said that, I think we also can see that it takes time for the market to, an offshore market to improve or recover, I should say. And we are really seeing all the signposts are all in the right direction. You know, capex from major oil majors are likely to increase. And we are also seeing that, yes, energy transition will continue, but it will take place together with fossil fuel. So, rigs are still required. In these rigs that we have, they represent the most advanced generation rigs that's available in the marketplace. The utilization rates have improved tremendously. They are all in excess of 90%. And general rule of thumb in the industry is that when you see utilization rates hit 85% and above, charter rates will usually go up, and we have seen that happen as well. The industry has also gone through a lot of consolidation, the oil drillers. Share price that they have is improving, which means their ability to pay has also gone up. So we are actively fielding inquiries and the sooner we can get it done, we will. So maybe I come back to the audience.

Yes. Joy from HSBC. Just following up on sort of O&M segment, on asset coal, I think you mentioned in the past there's a bit of a cash sitting at the asset coal level. Any possibility of, you know, sort of extracting some capital? towards year-end. And you mentioned that you prefer not to look at gearing, but if we look six months forward, will we see sort of monetization picking up and then gearing actually sitting lower versus where we are today? And then second question on the AUM business, can we get a bit of a breakdown between the fees? So what are sort of event-driven based on acquisition divestment as well as promotes? And what are sort of the core recurring base fee? And then lastly on real estate, the development income has been very lumpy for the last few half years. What should we think about this part of the business and your thoughts generally on how real estate business should look like going forward? Thanks.

If you don't mind, I will get my colleague who's been sitting there ready to answer questions. We'll start first.

Louis, you want to take the question? Thank you for the question. I'm raring to go. No, but I think as you point out, development is lumpy. I think for that very reason, we have been talking for quite a while now about pivoting away from the lumpy traditional trading and development profits and looking at more recurring income sources. So, hence, we still have land bank that we will continue to develop in markets where we see opportunity for development. So, for example, in Vietnam, we're still investing with our funds on developing land bank. But noticeably, it will continue to be lumpy, but we'll see a shift towards other sources of income for real estate.

Okay, thank you. On the first question on the cash in the asset code, I guess there is quite a bit of cash there, but of course asset code does have some requirements for the use of the cash. But as we sell more assets or as Assetco sell more assets, I think there will be more cash coming in. So I think we have actually worked with Assetco to have an early return of, I think it was a dividend, right? They paid back earlier this year. And our goal is to continue to engage with Assetco to see how we can accelerate that. Okay. In terms of your other question, which is on what is the likely gearing, I cannot tell you because there's a projection. But I did share that our goal would be to look at accelerating our monetization. So hopefully some of this will come true in the second half, and that will help on our net debt to EBITDA. Okay. Ah, on the fees, sorry. Chris is also waiting to answer the question.

Hi, Joy. On the fees-wise, actually, you know, because acquisition fees is all this, it's actually part of our, the way we have structured both whether it's for the REITs or for the funds, so we don't see it as a Just event-driven, we think it's more a recurring basis because we have it every year in terms of our acquisition fees. It's from both the REITs as well as the private funds. It's part of the feature of the fund structure, but it's roughly about 10%, I would say. And then in terms of performance fees, it's also a feature that we have in our REITs and trusts as well as in our private funds. So that to us is all actually recurring basis. That's about 12%.

Thank you, Chris. Tsui, you have a question? Yes.

Yes, I do. Sorry for my query. I have three questions. Right. So the first one is on capital recycling. It's, of course, slowed down in the first half and you've kind of forewarned us about it. How do we think about the second half? Should we see an acceleration? And can you talk about some of your plans apart from, say, spin-off of DC7 or even the Asset Co.? ? Second question is on, actually second and third question is on infrastructure. So there was a half and half decline in earnings from operation for infrastructure from about 350 million to about 307 million. Can you just share some color of what happened down there? And then the third question is that on slide nine, you talk about that infrastructure growth target. why EBITDA? Why not profit? Should we be thinking about some, say, higher costs ramp up that will kind of mute the sort of earning trajectory? Thank you.

So I think for us, we are always looking, of course, you can express it in different ways, but I think the way why we express this in EBITDA form is that it's a recurring business, right? So this order book that Cindy's division have generated or has grown, from scratch, now it's $5.2 billion, it is not one-off in the traditional sense. So if it's one-off like an EPC, then you will say, what's the profit margin? So we're really looking more at recurring business that will generate EBITDA, because these are contracts, many of these are contracts that are multi-year, and some of them quite long-dated contracts. And this is exactly the type of business that we are pursuing. So maybe on the second question on infrastructure performance, Cindy, I think you've covered some of that, but maybe you can see whether any additional colour you want to provide.

There are seasonality if you were to compare half on half, especially on power and renewable. That includes not just our Singapore business performance, but also our associated company in Europe. So I think you will appreciate that there are seasonality in Singapore. in energy performance, energy business performance half on half. But let's look at it on a FUYA basis, talk about it maybe when we show the FUYA's result. Just to supplement a bit on the EBITDA representation or the target growth, we use EBITDA because this is really quasi-cash. So think about it this way. This long-term contracts for provision of solution and services will be built on a monthly basis with cash payment from client. So this is important point to note. We have this visibility for the next 10 to 15 years to be delivered. Second item is that such long-term contracts for solution and services have innate back-end indexation. So we also will be insulated from inflationary cost pressure as we deliver such services and solutions over the subsequent years. So these are very two important points to note. Thank you.

Thank you. Now, your first question was on capital recycling. I guess we call that monetization. So, as I mentioned, we are looking for opportunities to re-accelerate. I think there's always a fine line that we take. I mean, like my earlier answer to the question on RICCO, we do want to monetize as soon as we can. the market is coming towards us. So it's a question of do we do it now? Do we do it six months later? Then we can see what's the difference in terms of what we call a wholesale analysis. But fundamentally, we are driven to monetize because I think this is a very key part of our growth strategy. Our funds under management is really the one that is providing the ammunition for us to grow. But then within our own balance sheet, the assets that we've identified for monetization, our goal will be to monetize them as soon as we can, provided the pricing is correct. So I think you mentioned about DC7. I think Chris has already addressed that already. Genting Lane. No? You shake your head. What? What other assets? Besides DC7?

I think I mentioned Singapore assets, Vietnam assets. We're looking at those in the real estate space as well.

Anyway, good, huh? Good. Suki, you have another question?

I have a few questions.

I know. So three, and then after that I'll come back to you again.

Sorry, three, so you need to actually pick the right one. Okay.

No, no, no, you can have more, but you start with three first. I'll give you a chance. Don't worry.

Okay, thanks. I'm just sorry to just go back to infrastructure. Just wanted to check. You mentioned that half and half is not a good gauge to look at because there are seasonality. But if we just look at the cut alone, first half last year was extraordinarily strong, and you actually noted that 53 million was extraordinarily strong. So just wanted to check what was so extraordinary last year and whether that can actually continue this year. Just also, this is not part of the question, this is just a follow-up earlier on. So I'm still on my first question. You mentioned earlier at the beginning of the briefing on Singapore also have seasonality. Did I catch that wrong? Like Singapore shouldn't have seasonality, right? Then just on connectivity, is data center network segment profitable or how much is the profit? And back to real estate. There's a valuation gain in the first half this year. Which assets are these? And also in the second half last year, also a strong gain, but we didn't get to ask you. So what were the properties this half and last half that had a reveal gain?

So you have three questions on infra, connectivity and real estate. Maybe Cindy, you want to do the first one?

So specifically, first half 2023, the majority of the impact is due to the contribution from an associated company in Europe. So the associated company in Europe is a Switzerland-based integrated energy business player. So we trade, our associated company trade in gas and electricity. As you can, if you recall, in the last two years, Europe has experienced very volatile energy market, thanks to not just the hot war in Ukraine-Russia, but also weather. So I think that extraordinary contribution from our associated company is now muted in first half 2024. Sorry, second half 2023 versus first half 2024. Half and half, right, your question? Singapore, muted, but you can't say that there's no seasonality because weather is also one constraint. Gas price performance is also another. That's at the market level. But in terms of our contracted portfolio, we are diligently insulating ourselves from seasonality by making sure our contracted portfolio is resilient enough okay uh thanks cindy uh kevin you want to answer this on profitability just on uh profitability for data uh dcn uh for first half it is a slight positive yes

So for this half, we don't really disclose it at the asset level, the adjustments, but I think as you would expect in a market like China, we have made some downward adjustments, but these have been more than offset by fair value gains in markets like Singapore and some other markets outside in this region that we've been playing in. Similarly, last half, most of the fair value gains were from the commercial office and retail assets that were closer to completion. So what I can point out quite clearly is, as you know, Keppel South Central in Singapore is close to completion. So we've adjusted the valuation method for that asset and that's contributed to the gain in this half.

Do you want to have more questions?

So just on FOTEL, the losses are quite wide. What is the plan for FOTEL and what's the book value that we have in the company? Actually, I can't remember. Maybe we can just refresh our memory on FOTEL's book value that we can recognize and what's the plan and whether it was actually making losses second half last year.

Okay, that's all, huh?

Okay, just on Flotel, maybe I'll just answer the question in two parts. The losses that we see for first half this year is primarily due to two, I guess, unbudgeted events where they recently refinanced a bond stack in order to consolidate everything into one stack and had to incur additional in our fund interest. That's point number one. Point number two is one of their vessels has actually gone through an unexpected sort of repair to get it ready for, you know, for charter. Flotel itself is actually doing very well as far as the four vessels goes, and they're quite well chartered, you know, for quite long periods, actually. If you look at their current order book now that is fixed, it's almost close to slightly more than $400 million as far as order book goes for the next couple of years. The... I'm sorry, the other question... Just on losses for Flotel for last year, Flotel's depreciation is still high, so we continue to see P&L being negative, but we expect them to turn around very soon with most of the charters coming live from second half of this year onwards.

Thank you. There's a question from the floor.

Hi, I'm Felicia from The Edge. I have one question on the Bifrost cable system. Do you have a completion rate and any expected ROI on that?

Expected what, sorry?

ROI.

ROI. Oh. Okay. We are, you know, it's about, I think it's about more than almost 80% late. So we're quite at very advanced stages. We're still going, we still have a few landing stations to complete. Currently, we expect it to be ready for service first half of next year. ROI, we don't really disclose this, but it's been a good investment, I think, for capital and for the fund, for the investors in the fund. The inquiry for the fiber pair or from the fiber pairs that we have, has been good and as we get closer to ready for service, we've seen that the rates have actually gone up significantly. So this is one investment that should perform significantly above underwriting. Maybe I move on to the two questions that have been there from online for a while. So maybe I address that first. First question is from Miyoko Tani of Nikkei. Thank you for the presentation. On your plans in China, specifically in the real estate sector, what is your stance and plans amid the prolonged weak market environment? Are there any specific types of properties that you think have better potential and you're keen to pursue? I think I kind of addressed this earlier on. We believe that what China needs today is quite different from when we first entered the market 30 years ago. So we have kind of put up a new playbook for China. focusing on what China needs today and also where capital can contribute effectively. You will have heard from my remarks that we're no longer just kind of looking at real estate deals per se, but we're actually providing services, including helping looking at sustainability looking at master planning in Suzhou and Jinan so these are all part of our real estate as a service of course there are other areas outside real estate that we are keen on as i mentioned energy transition data centers connectivity so all these are areas that i think will be important There will still be a market for real estate in China. But increasingly, it is really more China for China. So we are starting to see as the market bottoms out, there's demand, investor demand. But increasingly, this investor demand are more local, meaning coming from the local investors in China rather than from overseas. And as an asset manager, this would be the area that we will be tapping on. So the next question is from Paul Chu of Philips Securities. How much of the $203 million asset management fee were transaction related? I think Chris has already addressed that. Any updates on the performance of RICO? I think I will also address that. I think the thing about the vendor notes that we have or the credit notes that we have on RICO, There are some accounting treatment there that sometimes we get interest on the credit notes, but there's some accounting amortization, et cetera, first-day loss. So sometimes it can be quite difficult, not so clear to see. But maybe one way to look at it is that it's about $4 billion, so it's sitting on our books. We have associated with that, if you work out on our interest costs, it's about $170 million a year. But if you look at the charter income that we get from the jack-up rigs, only the jack-up rigs that we have chartered out, we are getting about 70 odd million a year so of course the other rigs are not chartered out so that's why there's still so I think maybe that's one way to kind of look at it of course our goal is not just to charter our goal is to monetize if you know if chartering is a way for to lead to monetization then you know that's the way that we'll pursue it so maybe that's one way of looking at that okay any yes friends

Just two more questions. I realize that in this few days, you bought this paramount asset in the hope of warehousing. Correct me if I'm wrong, but we have not seen capital doing that for a while now because a lot of your assets have been bought. by your funds and third-party capital. So has there been a change in the strategy? So that's my first one. And second, I think, Christina, you mentioned that the third data center fund, the FUM, is $10 billion. Is that the number that you said? Because it's another $10 billion, right?

I think we're talking more about the GAV, because in terms of the equity raised, and then you will do a leverage on leverage basis, so actually the GAV is much higher.

Okay, so my second question will be, can you sort of give us a sense of what's the FUM from the private credit fund as well as the other fund that you're targeting to launch, which is the education fund. So if you were to add up together, you're actually already above that $100 billion by 2026, right?

I don't keep increasing my target.

I think you're not wrong. I think at the end, you know, the $100 billion target is just an interim milestone, right? I think our goal is really $200, it's not $100. So if Christina and the FMNI side can achieve $100 earlier or more than $100 by 2026, who is going to argue with her, right? So you had a question on warehousing. So generally, as a rule, we do not like to warehouse, generally, because I think if we have funds that are raised that can invest in that particular asset, then that's the best way to do it. But sometimes, you know, there are opportunities that come up that look interesting to us. And we may find that it's easier to have launch a fund with some seed assets. And then this is something that, you know, where Paramount fits in. Paramount fits in in other ways as well. I think we're going to apply our solutions that we think we can improve the performance. It's already quite well. I mean, it's finished. When was it completed?

Two years ago. And it's already up to about 80% discount. And we believe we can lease the most of it out before we put it as a seed asset for an indie office fund.

So it's quite well leased and it's also recurring income. So in a way, even when it sits on our books, it should pay for itself because the yield is quite good. And so it doesn't cost a burden as far as servicing the debt is concerned. And we'll look to put it into a fund. I mean, that's the goal. Okay. Okay? Any further questions? If not, thank you very much.