1H 2025 Financial Results Webcast & Q&A Session

On ROE, you previously spoke about a 15% ROE target, on a group basis. Now that you have separated Keppel into new and old, and your New Keppel is already above 15%, what do you think is actually an optimal ROE for the New Keppel?

LCH

The ROE for the New Keppel – it is not surprising to us - that it is already at 15%, because it is a very asset-light model. Particularly, a lot of these businesses are built organically, including our asset management business, so we would expect the ROE to be quite high. I think the key focus is not to set another new target for ROE, but to see how we can achieve a higher ROE over time as we monetise the old Keppel, or the non-core assets. Because with that, we will be able to also fund new growth. At the same time, we can also reduce our debt. ROE going up by itself is not important; it is the fact that it is accompanied by a reduction of leverage over time. And of course, part of the ROE improving over time would be driven by reducing the denominator, as we return capital to our shareholders. It is recurring earnings going up, reducing debt, and reducing shareholders’ equity, as we return capital to shareholders. On old Keppel, or the non-core segment, the NAV is about $4.7 billion. How sustainable is that NAV? Or how realisable is that NAV, and once realised, how should we think about returns to shareholders for that $4.7 billion?

LCH

Yes, the NAV is $4.7 billion. But I think significantly, as we over time monetise this $14.4 billion, which includes about $2.9 billion of cash and receivables that are already embedded, that means that we do not have to sell $14.4 billion - we just need to unlock $14.4 billion minus the $2.9 billion, before the embedded cash and receivables are released. We will be looking to also reduce debt over time, because as we sell, it is not just releasing the $4.7 billion in NAV, but reducing the debt significantly.

On the share buyback, how do you intend to execute this $500 million? I think the last time you did it in FY22, you did it on a very consistent day-by-day basis, and back then, the stock was trading below NAV. But I think today, the stock is at $8.73, already way above the NAV of $5.63. Is this going to be a consistent day-by-day thing again, or is it going to be when you think that the stock is cheap? Why not a higher interim dividend, or why not lower gearing, but a share buyback instead, given where the stock is already trading?

LCH

On the share buyback, the way to think about it is that we are not only thinking about returning capital, but in this instance, this share buyback will also be used to fulfil the equity share plan that we have for employees, and also used as currency for our future M&A. Immediately, there is Phase II of the Aermont acquisition, which would be partly funded, like Phase I, by shares, and this is due in 2028. This is something that we are very mindful of, and we can see, for the first tranche of 50% last year, we tendered the shares to Aermont at $7.16, whereas the cost was actually $5.80. As we continue to set Keppel on this new trajectory, we expect Keppel to be re-rated, and then as we are able to monetise the non-core over time, we expect the share price to perform. In terms of the timing of the share buyback, we are not going to be so transparent, but I think it is a need, so it is not just a strategy. We do need these shares, and we prefer not to issue new shares because that would be dilutive, especially where Keppel is going. Will you be swaying more towards buying it on a less chronic, less frequent basis, or is it basically going to be similar to the last time around?

LCH

I think the circumstances would depend on the market. All I can say is that this is a need for Keppel, because we do need these shares, and we prefer to buy from the market rather than to issue new shares. We will execute it over time, but it is very clear that we do need these shares. If you were to look at the 31% jump in Aermont’s net profit, how much would your EV/EBITDA be on your acquisition price, and would it impact the acquisition price for the remaining 50%? Thanks.