Keppel Corp Ltd Ord

Good morning, ladies and gentlemen. Welcome to the conference for Capital Limited's first half financial results for 2025. We have on the panel this morning, from your left, Mr. Manjot Singh Mun, CEO Connectivity and CEO M1. Mr. Louis Lim, CEO Real Estate. Ms. Christina Tan, CEO Fund Management and Chief Investment Officer. Mr. Low Chin Hwa, CEO, Mr. Kevin Cheung, CFO, and Ms. Cindy Lin, CEO, Infrastructure. We will begin the session with presentations by CEO Mr. Low Chin Hwa and CFO Mr. Kevin Cheung, followed by the question and answer session. Mr. Low, please.

Good morning. Capital delivered strong results in the first half of 2025. despite a volatile global environment. Underpinned by our timely and impactful transformation into a global asset manager and operator, focused on growing FUM and recurring income with an asset-light strategy. Today, we are recognized as a trusted investment partner with $91 billion in funds under management as at end June 2025. We have also made substantial headway in pivoting to an asset-like model with $7.8 billion in asset monetization announced today. Building on this strong momentum, we are confident of achieving our Vision 2030 interim FUM and asset monetization targets by end 2026. To provide greater clarity on the performance of the new capital, we will be reporting our results excluding a portfolio of non-core assets that are no longer aligned with our strategy and which will be divested over time. The non-core portfolio, which had a carrying value of $14.4 billion as at end June 2025, comprises the legacy offshore and marine assets, residential land bank, selected property developments and investment properties amongst other investments and includes some embedded cash and receivables of $2.9 billion. To be clear, many of these non-core assets are profitable with land banks carried at our historical land cost but they will be separately reported on as they are not part of our business focus, nor do they contribute to New Capital's asset-light model and growing recurring income. Today, the earnings of the New Capital are being funded by only a part of our balance sheet. By reporting the non-core portfolio separately, we aim to provide greater transparency that will enable the market to better assess the progress of the new capital and the returns from our asset-light business as a global asset manager and operator. As we accelerate the growth of new capital, we expect that the market will re-rate our stock price and accord us a growth multiple. In addition, the NAV of the non-core portfolio which we were monetized over time, should also carry further value. In first half 2025, the new capital's net profit surged by about 25% year on year to $431 million, boistered by strong and steady infrastructure earnings and improved contributions from real estate. All segments were profitable during this period, contributing $444 million in recurring income, an increase of 7% year-on-year from $414 million in the first half of 2024. The non-core portfolio incurred a net loss of $53 million in first half 2025 versus a net loss of $41 million in first half 2024. Despite the losses, our all-in net profit for first half 2025 rose 24% year-on-year to $378 million, up from $304 million in first half 2024, underscoring the strength of our core business. In our efforts to drive capital-efficient growth, we achieved an annualized ROE of 15.4% for first half 2025, compared to 13.2% in first half 2024, excluding non-core assets. At the end of June 2025, the net debt to EBITDA of the new capital was 2.4 times. With our asset-light model, the new capital will continue to improve on its ROE and grow our recurring earnings from asset management and operating and maintenance fees as well as other sources of operating income. Monetizing the substantial non-core portfolio, whose carry value is larger than our gross debt, will give us ample opportunity over time to reduce debt, fund growth for the new capital and return capital to shareholders. We will continue to be prudent and nimble in capital management, keeping our operations and costs efficient amidst the volatile landscape. To support our transformation as a global asset manager and operator, we launched Project Lean in late 2024 to streamline how we work and empower our people to focus on what matters. Building on the success of the program, we are now driving further cost optimization outsourcing and digitalization, with some of the savings reinvested into growth areas aligned with Vision 2030, such as building our capabilities to deploy AI at the enterprise level. Through continued streamlining, we have achieved $88 million in recurring annual run rate cost savings, advancing towards our stretch target of $120 million per annum by end 2026. Across CAPL, we are also harnessing digitalization and AI to work better, smarter, and faster, partnering with technology leaders like AWS, OpenAI, and Google to drive meaningful and measurable impact. Our CAPL-wide data lake provides a secure and unified source of trusted information to accelerate decision-making and analysis, and builds on software-as-a-service platforms to achieve greater speed and agility. These efforts have streamlined our processes significantly, reinforcing a culture of doing more with less. The practical use cases of applying AI to our investments, asset management and operating activities have mushroomed. To improve efficiency and speed of adoption, we are churning out agentic AI models from our own AI factory using our proprietary Capital AI Operating System or CAI. 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 first half 2025. The interim cash dividend, which will be paid to shareholders on 21 August 2025, is the same as last year's interim dividend of $0.15 per share. Reflecting the Board's and Management's confidence in Keppel's growth trajectory and our progress in asset monetisation, we have also announced this morning a $500 million share buyback programme. Shares repurchased under the program will be held as treasury shares, which will be used in part for the annual vesting of employee share plans, as well as currency for future M&A activities, including the satisfaction of our consideration for Phase 2 of the Ammon acquisition come 2028. Shares of capital were tendered as part of the consideration for the acquisition of the first 50% of Ammon in April 2024. These shares were Treasury shares acquired through an earlier share buyback program, which were tendered at a share price of $7.16 but had a cost of approximately $5.80. Earlier this year, we established the Accelerating Monetization Task Force with the aim of optimizing the speed of divestment and exit value of capital's non-core assets. Our intensified efforts have yielded encouraging results. In the year to date, we have announced around $915 million in divestments, including $477 million from real estate assets and investments in India and Vietnam announced yesterday. This brings us to about $7.8 billion in asset monetization announced since October 2020, not including the divestment of operating divisions such as capital offshore and marine. Moving forward, besides accelerating the growth of the new capital, will be laser-focused on monetizing the non-core portfolio, just as we have monetized the $7.8 billion of assets identified earlier in 2020. To this end, I'm pleased to share that we're in the process of negotiating over $500 million worth of real estate and connectivity asset monetization transactions, which we hope to finalize before year-end. This year has been a busy period for our asset management business as we continue to double down on our growth initiatives. In the first six months of the year, we recorded 195 million asset management fees. By the end of June 2025, our FUM reached $91 billion. In the year to date, we have raised about $1.9 billion in equity and completed $6.5 billion worth of acquisitions and divestments across our private and listed vehicles. Our flagship fund strategies for data centers, education assets, and sustainable urban renewal are gaining good traction. Collectively, we have raised FUM of $4.7 billion in the year to date, reinforcing Keppel's brand on the radars of global limited partners. I'm pleased to share that Keppel has been ranked in IPE Real Assets list of top 100 infrastructure managers, emerging as the fourth largest in Asia Pacific and the 23rd largest globally by assets under management. Just last month, we sealed a strategic partnership with AIIB to mobilize up to 1.5 billion U.S. to fund Capel's projects across green and tech-enabled infrastructure and connectivity solutions in Asia-Pacific, solidifying our reputation as a preferred investment and ecosystem partner. In Europe, Amon Capital continues to perform well and contributes meaningfully to Capel's asset management platform. Ammon has made good progress at deploying Fund 5 in promising investments and plans to launch Fund 6 later this year. For financial year 2024, the first year of our acquisition, Ammon recorded a net profit that was 31% higher than what we had projected at the time of acquisition. With a total deal flow pipeline of $39 billion, We see many exciting opportunities ahead for capital to deploy our capital and drive fee generation. Looking ahead, we're likely to enter a more inflationary environment fueled by the effects of tariffs and trade restrictions. Investors are expected to continue favoring asset classes that can provide steady cash flows and which can serve as a hedge against inflation. This will continue to drive demand for alternative real assets, which are underpinned by resilient macro trends, such as the energy transition, digitalization, and the AI wave. In our operating platform, infrastructure continues to be a core and steady pillar for Capo, delivering strong recurring cash flows and contributing to our asset-like model. In first half 2025, net profit from our infrastructure division rose 8% year-on-year to $333 million, while its EBITDA grew 7% to $405 million, despite softer spark spreads. This attests to continued growth in the non-power segment, where we secured new decarbonisation and sustainability contracts and grew long-term supply concessions to $6.8 billion as at end June 2025. Earnings resilience and growth are set to continue with about 1 GW of new power capacity coming online, including the 600 MW Kaposakra co-gen plant in first half 2026, and another potential 3 to 500 MW megawatts of renewable imports from 2028. This will not only expand our earnings, but will also reduce our carbon intensity, reinforcing the infrastructure division as a capital efficient and technology driven growth engine for Keppel. By leveraging Keppel's integrated ecosystem, We are also pushing the boundaries with innovative and sustainable solutions to support the world's growing digital needs. A prime example is our floating data center project. By tapping coastal and offshore spaces, this game-changing solution offers an alternative to land and resource-constrained cities seeking to scale digital infrastructure sustainably. The 25 MW project has recently completed its environmental impact assessment in Singapore and is being committed to a global hyperscaler. Subject to final approvals from the authorities, we expect to start construction later this year and target completion by end 2028. When completed, Keppel's Floating Data Centre project a proprietary asset funded by the Capital Data Center Fund II, will be the first of its kind in Asia-Pacific with a full-scale proof-of-concept for the region. We see strong potential for its replication in Singapore and beyond, especially in markets where land, power and water are limited. I am also pleased to share that significant progress has been achieved in the development of the Bifrost cable system, The cable laying operations are now complete and the cable system is expected to be ready for service by the end of September this year. The significant milestone boisters our track record in delivering large-scale digital infrastructure projects, paving the way for future cable systems to connect more regions and geographies. To conclude, While the external environment is highly volatile, we are on our way to realizing Vision 2030. Keppel today is a highly valued ecosystem partner who brings together capital, capabilities and innovation to deliver strong returns to our shareholders and LPs while contributing to a more sustainable and connected world. We will look to accelerate the growth of the new Keppel and focus on monetizing the non-core portfolio as soon as possible, which we are confident would lead to a further re-rating of capital by the market. When we succeed, the new capital will be a leading global asset manager and operator, focused on fast-growing sectors across sustainability and digital infrastructure, areas experiencing strong tailwinds and where capital is uniquely positioned to lead. With $200 billion in FUM, our earnings will be anchored by strong recurring income from asset management fees and long-term operating contracts. By 2030, the $14.4 billion non-core portfolio should be substantially monetized, providing ample capital for the new capital to grow reduce our debt, and also reward our shareholders. Our asset line model can be expected to deliver an ROE significantly above 15%. CFO's Kevin will now take you through details of the company's financial performance. Kevin.

Thank you, CEO, and a very good morning to all. I shall now take you through Keppel's financial performance. Our net profit for first half 2025 was 378 million, 24% higher than the 304 million for first half 2024. Consequently, annualized ROE was higher at 7.2%. Net debt to EBITDA was lower than last year end, mainly due to higher EBITDA. Free cash outflow was $48 million improved in first half of 2025 from the outflow of $216 million in the prior period mainly due to net cash inflow compared to outflow from operating activities arising from positive working capital changes partly offset by higher net cash use in investing activities Excluding non-core portfolio for divestment, net profit of New Capital was $431 million as compared to $345 million in first half 2024. The non-core portfolio for divestment comprises mainly of legacy offshore and marine assets, residential land banks selected property developments and investment properties hospitality and logistic assets as well as the other non-core investments that are not aligned with capital strategic focus as an asset like global asset manager and operator and which will be divested over time as at end June 2025 the carrying value of non-core portfolio was 14.4 billion 61% or 8.8 billion comprises property related assets 33% or $4.8 billion of legacy offshore and marine assets and 6% or $0.8 billion of investments and others. Included in the $14.4 billion was $2.9 billion of associated cash and receivables. As mentioned by CEO, to provide greater clarity on the performance of new capital, in the next few slides, I will be presenting our financials excluding the effects of the non-core portfolio for divestment. Net profit of new capital increased 25% year-on-year to $431 million. Real estate achieved higher earnings, while infrastructure and connectivity recorded lower profits. Infrastructure continues to be the largest contributor to capital's earnings, followed by real estate and connectivity. Analyzed ROE improved to 15.4% in first half 2025 from 13.2% a year ago. Net debt to EBITDA was 2.4 times as at end June this year, comparable to end December 2024. The increase in net debt due to investments during the period was largely offset by improved EBITDA. In line with our focus on growing recurring income, new capital generated cash inflows from operating activities. Together with divestment proceeds from the non-core portfolio, we reinvested the cash to fund capital calls from sponsor stakes and co-investments, as well as acquisitions, resulting in a free cash outflow of $232 million in the first half of the year. Improved operating income from infrastructure and lower operating loss from real estate were partly offset by lower asset management earnings. translating into recurring income of $444 million, which is 7% higher than the $414 million a year ago. Higher valuation gains were led by higher fair values on investment properties and investments. Divestment gains increased year on year, arising from monetizations from real estate and connectivity. Net loss from corporate activities was $17 million, with net interest income being offset by higher taxes. Moving on to segmental performance. Infrastructure segment recorded a net profit of $346 million in first half 2025, 5% on $90 million lower than the $365 million in first half 2024. Asset management net profit declined as first half 2024 benefited from acquisition fees from Capital Infrastructure Trust's acquisition of a German solar portfolio. and an Australian transportation business, as well as fees from better performance achieved by KIT. This partly offset the divestment fee from KIT's disposal of its interest in the petroleum products import storage facility in the Philippines, as well as lower costs in first half 2025. Stronger operating income was supported by higher contributions from decarbonization and sustainability solutions, as well as sponsor stakes and co-investments. These were partly offset by lower earnings from integrated power business as a result of lower contractor spreads. The segment recorded lower fair value gains from its sponsor stakes in private funds in the first half of 2025. Real estate segment achieved a net profit of $98 million, a significant improvement compared to the net loss of $20 million a year ago. Asset management net profit of $41 million was $22 million higher year-on-year, arising from six months contribution from AMON which was acquired in April last year. Higher management fees following the first closings of two funds in 2024, as well as lower costs. Operating income was $10 million higher year-on-year, mainly due to higher contribution from sponsor stakes and lower interest costs, partly offset by higher losses from the senior living business. The segment recorded valuation gains of $27 million from investment properties and sponsor stakes in first half 2025. In first half 2025, real estate also completed and recorded gains from the partial disposal of Saigon Center Phase 3 in Vietnam. Net profit from connectivity segment of $57 million was 19% or $13 million lower than $70 million in first half 2024. Asset management net profit was slightly higher year on year at $14 million, mainly from higher management fees following the acquisition of two assets by Capital DC REIT and first close of DC Fund 3 both in December 2024. Operating income was marginally lower at $40 million mainly due to lower earnings from M1, partly offset by higher contributions from capital DC REIT. The lower valuation gains from sponsor stakes in private funds and the forfeiture fee paid by M1 were partly offset by higher valuation gains from a data center investment. Net loss from non-core portfolio was $53 million as compared to $41 million in first half 2024. Net loss of legacy O&M assets of $91 million in first half 2025 was mainly due to interest costs attributable to legacy rigs, fair value loss from Citrum shares, and share of loss from an associate, although both recorded much lower losses year on year. As mentioned by CEO, many of the non-core assets are profitable. For first half 2025, the property-related non-core assets registered a net profit of $86 million, mainly driven by gains from divestments in China and Vietnam, which were partly offset by operating and fair value losses on investment properties and losses from development projects. Investment and others recorded net loss of $48 million, mainly from fair value losses on investments, partly offset by gain on the disposal of Computer Generated Solutions Inc. in the United States. With that, we have come to the end of the presentation, and I shall now hand the time back to CEO for the Q&A session. Thank you.