Good evening, ladies and gentlemen. We welcome all of you, including those viewing this over the web, to the conference for Keppel Corporation's first half financial results for 2023. We have on the panel this evening, from your left, Mr. Thomas Pang, CEO of Data Centres and Networks division; Mr. Louis Lim, CEO of Real Estate division; Mr. Chan Hon Chew, CFO; Mr. Loh Chin Hua, CEO; Ms. Christina Tan, CEO of Fund Management and Chief Investment Officer; Ms. Cindy Lim, CEO of Infrastructure division; and Mr. Manjot Singh Mann, CEO of M1. We will begin the session with presentations by CEO, Mr. Loh Chin Hua, and CFO, Mr. Chan Hon Chew, followed by the question and answer session. Mr. Loh, over to you, please.
Thank you. Good evening, everyone. The first 6 months of 2023 were transformational and productive for Keppel. After concluding the successful divestment of the offshore and marine business at the end of February, we unveiled a major restructuring program to remove our conglomerate structure and reorganize ourselves as 1 company with 3 platforms: the fund management, investment, and operating platforms. Keppel today is advancing as a global alternative, real asset manager with deep operating capabilities in infrastructure, real estate, and connectivity. With a sharpened focus and strong growth initiatives, we will create value for Keppel's shareholders, investors in the private funds and trusts that we manage, as well as other stakeholders. In first half 2023, Keppel delivered its highest net profit on record in 55 years.
We achieved a net profit of over SGD 3.6 billion compared to SGD 498 million in 1H 2022. About SGD 3.3 billion of this was from gains achieved from successfully divesting the O&M business. Annualized return on equity was 36.8% in 1H 2023, compared to 8.4% in 1H 2022. Excluding the discontinued O&M operations from both periods, we delivered a robust net profit of SGD 445 million in 1H 2023, higher than the SGD 434 million in 1H 2022. As we continue to execute our strategy and restructuring plans to be an asset manager and operator, we are confident of improving performance as we grow our business, capture synergies, and optimize costs.
We remain watchful of risk in the high interest rate environment, keeping borrowing costs stable while maintaining flexibility to respond to opportunities. As at end June 2023, about 65% of the group's borrowings were on fixed rates, with an average interest cost of 3.53% and weighted tenor of about 3 years. As at end June 2023, our adjusted net debt to EBITDA was 4.7 times, comparable with that of other global asset managers. In appreciation of the support and confidence of the shareholders, the board of directors has approved an interim cash dividend of SGD 0.15 per share for the first half.
The interim cash dividend, which will be paid to shareholders on the 18th of August 2023, is comparable to last year's interim dividend of SGD 0.15, reflecting the board and management's confidence in Keppel's performance and execution of our transformation strategy. With the latest interim cash dividend of SGD 0.15 for first half 2023, coupled with the financial year 2022 final cash dividend of SGD 0.18 per share that was paid in May 2023, shareholders will be receiving a total of cash dividend of SGD 0.33 in 2023 for every Keppel share held. This translates into a cash dividend yield of 4.7% based on Keppel's closing share price of SGD 6.99 last evening. In addition to the interim cash dividend, we are pleased to announce a proposed special dividend in specie of Keppel REIT units on the occasion of Keppel's 55th anniversary.
For every five Keppel Corporation share held, our shareholders will receive one Keppel REIT unit. Keppel REIT traded at SGD 0.915 per unit on its closing last evening. A key goal of our transformation into a global asset manager and operator is to deliver sustainable growth and high returns to our shareholders. The proposed dividend in specie of K-REIT units is a part of our capital management initiatives and will allow Keppel shareholders to own a stable investment with steady yields. Keppel's proposed dividend in specie will be put up for our shareholders' approval at an EGM to be held later this year. Further details on this EGM will be announced in due course. Post-distribution, Keppel will remain the largest unit holder of K-REIT, with an interest of about 37.1%.
As a global asset manager, we are committed to drive K-REIT's growth and have strong alignment with the interests of K-REIT unit holders. Our proposed distribution will increase K-REIT's public float, allowing it to widen its investor base and enjoy higher liquidity, both of which are beneficial to K-REIT unit holders in the longer run. We set for ourselves and delivered on many ambitious targets under Vision 2030. The acceleration and strong execution of our transformation plans have created superior, tangible value for shareholders. Over the 18-month period, from first January 2022 to end June 2023, including the completion of the O&M transactions and the distribution in specie of Seatrium shares worth SGD 2.19 per Keppel share, Keppel's TSR reached 118%, outperforming STI's 9.62% by more than 12 times.
For shareholders who held on to their distribution in specie of Seatrium shares, the combined value of the Keppel and Seatrium shares would be SGD 9.76, based on the share prices of the two counters at the end of business yesterday. Reflecting Keppel's strategy and our shift away from lumpy EPC and development profits, our recurring income surged 62% year-on-year to SGD 340 million in the first half 2023, making up over three-quarters of our net profit, compared to just under half in the first half 2022 from continuing operations. The strong year-on-year improvement was bolstered by higher operating income from our infrastructure division, which continues to accelerate its growth in renewables, clean energy, and decarbonization solutions.
As a global asset manager and operator, we have refined the definition of our assets under management to include some SGD 12.4 billion of real assets on Keppel's balance sheet. These are assets in the monetization program that can be potentially converted into fee-bearing funds under management over time. Our FUM, or what we have previously referred to as AUM, increased to SGD 53.2 billion at the end of June 2023, from SGD 50 billion at the end of 2022, with the completion of new acquisitions. Of this FUM, we have about SGD 10 billion in dry powder, which we can deploy into new investments. Our asset management fees, which amounted to SGD 116 million in first half 2023, translates into an annualized fee to FUM ratio of 50 basis points, putting us on par with industry peers.
Looking ahead, we will continue to work with laser focus towards achieving our FUM targets of SGD 100 billion by 2026 and SGD 200 billion by 2030, exploring both organic and inorganic opportunities to drive long-term growth. Against a volatile market and a prevailing high interest rate environment, we adopted a more cautious approach in our investment activities during this period. Nevertheless, we continue to grow our asset management business in first half 2023, with our fund management and investment platforms raising about SGD 1 billion in equity, completing SGD 1.1 billion in acquisitions, and divesting SGD 0.5 billion of assets. We have been prudent in holding back on new investments, but believe that second half 2023 will present more interesting investment opportunities as the market adjusts to the new pricing paradigm, which better reflects the tighter credit markets, higher interest rates, and more subdued economic growth outlook.
The anticipated increase in investment activity in the second half will, in turn, contribute to higher asset management fee income. Our private funds, REITs, and business trusts are currently pursuing over SGD 13 billion of deals across the spectrum of infrastructure, real estate, and connectivity assets. We will continue to invest to achieve the best risk-adjusted returns for our funds and investors. We have been actively marketing our new flagship funds, the Keppel Sustainable Urban Renewal Fund, the Keppel Core Infrastructure Fund, and the Keppel Asia Infrastructure Fund II, and we'll continue working with our Limited Partners to provide differentiated products that capitalize on Keppel's strong operating capabilities. With spending more cautious sentiments amongst investors, we announced the monetization of about SGD 420 million of assets in the year-to-date.
Since the start of our asset monetization program in October 2020, we have announced more than SGD 4.8 billion of transactions. These monetized assets have released some SGD 3.1 billion of cash, which can be used both to seek new opportunities as well as to reward shareholders. With strong capability and sustainability and connectivity solutions, Keppel is in the right space at the right time, and is well-positioned as an asset manager and operator to seize growth opportunities created by mega forces, such as the transition to low-carbon economy and increasing digitalization accelerated by generative AI. Amidst the volatile environment, we are seeing a growing pool of investors, including sovereign wealth funds and pension funds, seeking to allocate capital to alternative assets, which can serve as a hedge against inflation.
This is where Keppel can make a difference with our extensive experience in asset management and operating expertise across diverse asset classes. We are uniquely placed to give investors in our private funds exclusive access to strategic real assets in Keppel's proprietary pipeline, many of which offer critical infrastructure and prime real estate solutions that produce strong inflation-protected cash flows. Examples of these Keppel projects include the Keppel Sakra Cogen Plant, Singapore's most advanced and first hydrogen-ready power plant, which broke ground last week. The new Keppel Data Center campus at Genting Lane, where the first two buildings are fully contracted. The Bifrost Cable System, the largest capacity, high-speed optical cable across the Pacific Ocean, which will soon commence cable laying operations in the third quarter of this year, as well as landmark Grade A commercial assets in the central business districts of Singapore and Shanghai.
In our operating platform, our infrastructure operations and portfolio continued to advance on their growth trajectories. In first half 2023, our renewable energy portfolio, which includes co-investments with our private funds and Keppel Infrastructure Trust, grew to 3 GW, making up over 60% of our total energy portfolio of 4.9 GW, with projects across the spectrum of solar, wind, and hydropower. Our integrated power operations in Singapore continued to perform strongly, contributing over SGD 245 million to our recurring income in the first half 2023. Almost all of our existing electricity customers, I should say, are locked in on fixed or index electricity price plans, providing a cushion for us against power price fluctuations. Analysts have asked about the possible impact of Singapore's temporary electricity price cap announced in June, which we believe is quite limited.
Based on the EMA's estimates, had the temporary price cap been in place from October 2022 to April 2023, it would have resulted in a 3.2% reduction in the average uniform Singapore energy price. The net impact of this power price reduction on Keppel Infrastructure's operating income in first half 2023 would have been less than 1%, or about SGD 3 million. We continued to actively grow our end-to-end energy as a service offerings. As at end June 2023, our backlog of long-term contracts, comprising EAAS and operations and maintenance, reached SGD 4.1 billion and will provide income visibility for the next 10 to 15 years. Significantly, out of the SGD 2.1 billion in EAAS subscriptions, SGD 1.2 billion were secured this year. We have grown our presence beyond Singapore to Thailand and Vietnam.
Our EAAS projects will typically start contributing to the bottom line within 12-15 months of contract signing, thus allowing Keppel to quickly scale our base of recurring income. In the real estate division, we are expanding our Sustainable Urban Renewal offerings, or SUR for short, across Asia Pacific. The real estate division is actively working with our private funds to incorporate SUR features as part of our arsenal of asset enhancement initiatives. By incorporating smart and sustainable features into retrofitted buildings, we can also help the asset's performance and value. In China, economic growth slowed after a strong rebound in the first quarter. While sentiments amongst international investors have turned very cautious with regard to China, we continue to see pockets of opportunities in the cities where we operate and for the sustainable solutions that Keppel provides.
In first half 2023, our home sales in China increased 2.5 times year-on-year to 1,200 units. In the Sino- Singapore Tianjin Eco-City, our master developer sold two residential plots in the first half, underscoring the continuing demand for quality land parcels despite the broader economic slowdown. We have recognized SGD 14 million in profit from the first land transaction, while the second will be completed later this year. In line with our push away from lumpy development profits to more recurring income, our real estate division has monetized over SGD 3 billion of assets in China since 2017, and recognized a profit of more than SGD 1 billion. Some of the unlocked capital is being reallocated to pursue opportunities in different countries, such as India and Vietnam, as well as different asset classes, leveraging our asset-light model.
In our Data Centres and Networks division, we achieved financial close for the Bifrost Cable System, with Keppel's co-investors holding a 60% stake in Keppel's share of the fiber pairs. Importantly, we will earn operating and maintenance fees over 25 years once the system is completed in 2024. We have already secured over SGD 400 million in long-term operating and maintenance fees for the first two committed fiber pairs. Meanwhile, M1 continued to expand its solutions and services to both business and consumers. Revenue from the enterprise business grew 50% year-on-year to SGD 222 million in first half 2023, making up about 37% of M1's revenue for this period. M1's customer base grew 12.5% year-on-year, widening its lead as Singapore's second-largest mobile operator.
To sum up, whilst 2023 is turning out to be a challenging year, Keppel has had a fruitful first half. We have our work cut out for us for the rest of the year, we also see good opportunities as we continue our transformation and accelerate our growth as a global asset manager and operator. Our CFO will now take you through the group's financial performance based on our new horizontal reporting structure. Thank you.
Thank you, Chin Hua, very good evening to everyone. For the first half of 2023, the group recorded a net profit of SGD 3.6 billion, significantly higher year-on-year, due to the recognition of disposal gain of approximately SGD 3.3 billion from the successful divestment of Keppel Offshore & Marine. Excluding this continued O&M operations, net profit from continuing operations improved by 3% to SGD 445 million, from SGD 434 million in the first half of 2022. Annualized ROE was significantly higher at 36.8% due to the disposal gain. Annualized ROE for continuing operations was 8%, as compared to 7.3% for the same period last year. All segments were profitable, with improved year-on-year performance from infrastructure and connectivity.
Infrastructure Segment was the top performer for the first half of the year, delivering net profits of SGD 291 million, which represented almost two-thirds of the group's total earnings from continuing operations. Despite headwinds in some markets, the Real Estate Segment remained a key contributor, with SGD 186 million in net earnings. Connectivity Segment's net profit grew year-on-year, contributing 8% to the net profit from continuing operations. I further elaborate on the performance of each segment later on. Despite the substantial distribution in specie of shares in Sembcorp Marine, or now Seatrium, and payment of financial year 2022 final dividend, net gearing only increased slightly from 0.78 times as at end December 2022, to 0.86 times as at end of June 2023, due to significant disposal gain.
Free cash outflow was SGD 732 million, as compared to SGD 127 million in the same period last year. This was largely due to short-term increase in working capital requirements from the infrastructure segment and the divestment of KOM. As KOM had a net cash balance of SGD 968 million, the completion of the divestment resulted in a net cash outflow for the group, partially offset by the receipt of SGD 500 million in cash consideration. Excluding the results of discontinued operations of SGD 3.2 billion, net profit from continuing operations was SGD 445 million, with positive contributions from all income streams. Underpinned by robust earnings from the infrastructure segment's integrated power business, recurring income, which comprises asset management income and operating income, grew 62% to SGD 340 million, from SGD 210 million a year ago.
This represents about 76% of first half 2023's continuing operations net profit, up from 48% last year. Earnings from EPC and development projects accounted for 29% of the group's net profit, at the same level as last year, with contributions mainly from Singapore trading projects and from Sino Singapore Tianjin Eco-City. Net loss from corporate activities was SGD 69 million, as compared to breakeven in the same period last year. In the prior year, there were significant fair value gains from the Group's investments in new technology and startups, in particular, Envision AESC Global Investments LP. In the current half year, fair value gains from investments were lower, while net interest expense was higher.
These continued operations recorded a net profit of SGD 3.2 billion, comprising 2 months' performance from KOM, excluding certain out-of-scope assets for the period 1st January to 28th February 2023, as well as the gain from the completion of the divestment of KOM at the end of February this year. Moving on to the segmental performance. The infrastructure segment achieved a net profit of SGD 291 million in the 1st half of 2023, more than double the net profit recorded in 1st half 2022 of SGD 139 million. This was led by robust earnings from the integrated power business on the back of higher net generation and contracted spreads, partly offset by lower share results following dilution of interest in an associated company in 2nd half of 2022.
The lower EPC contribution arose from environmental projects abroad, partly due to lower progressive revenue recognition in the first half of 2023, and unrealized foreign exchange differences. Asset management income was lower year-on-year, as first half 2022 benefited from significant acquisition fees recognized by Keppel Infrastructure Fund Management. This was partly offset by higher base fees following the change in the fee structure that took effect in second half of 2022 for public trusts managed by KIFM. The real estate segment delivered a net profit of SGD 186 million, which was 29% lower year-on-year, mainly due to lower operating income and fair value gains from investment properties. These were partly offset by higher asset management income, development profits, and gains from capital recycling.
The decline in operating income was a result of lower contributions from our sponsor stakes, higher net interest expense, and costs incurred for new initiatives. Last year's operating income was also boosted by a reversal of cost provisions relating to a commercial project in China. Fair value gains decreased by SGD 77 million to SGD 31 million compared to a year ago, largely due to lower fair value gains from investment properties and share of fair value losses recognized by Keppel REIT on its investment properties, as compared to fair value gains in the same period last year. The real estate segment achieved an increase in asset management income, driven by higher acquisition fees from an office tower in Seoul, and higher management fees relating to acquisitions completed in 2022.
On the back of higher contributions from Singapore trading projects and from the Sino-Singapore Tianjin Eco-City, with the sale of land plot in first half of 2023, development profits rose 29% from SGD 110 million to SGD 142 million. During the half year, SGD 21 million gain was also recorded from en bloc sales of a project in Ho Chi Minh City, Vietnam, and a project in India. Net profit from connectivity segment of SGD 37 million was 12% higher than the first half of 2022, of SGD 33 million, mainly due to higher operating income. Asset management income was stable year-on-year, supported by continued growth in revenue from enterprise ICT and managed services, M1 registered a 11% improvement in the net earnings.
This was partly offset by lower contributions from the Data Centres and Networks division, mainly due to costs of entering into new markets and initiatives. With that, we have come to the end of the presentation. I shall hand the time back to CEO for Q&A. Thank you.
We've come to the section on Q&A. First and foremost, I'd like to thank our invited guests who came in person. Of course, we have quite a number attending online. Maybe I will start off with seeing whether we have any questions. Zhiwei .
Hi, I'm Zhiwei from Macquarie. I have two questions. The first one is on capital recycling. That seems to have slowed a bit in second quarter. I think if my math is right, you did about SGD 5 billion year to date, which is up from the SGD 4.9 billion you disclosed in first quarter. I'm keen to hear how you intend to keep up your capital recycling momentum over the next 12 months. Of the initial SGD 17.5 billion in assets you highlighted that was available for this monetization, how much is left, and which buckets should we expect future capital recycling to come from? The second question is more on financials. I note that from your horizontal reporting, that Infrastructure did very well this quarter.
I mean, this first half, right? You actually had a surprising loss in operating income for real estate. The question is, what drove that loss within your real estate operating income? As for your operating income in infrastructure, that SGD 303 million, how sustainable are those earnings? What was driving the margin expansion in the first place? Thank you.
I will take the first question. This is on capital recycling. Yeah, indeed, it has slowed. I've alluded to the fact that even on the, on the investment side, we have been a bit more cautious in terms of our acquisition activities for the funds in the first half. We believe that, you know, we're still working on quite a number of monetization opportunities. We believe that the pace will pick up, and we still are looking to hit that SGD 10 billion-SGD 12 billion by 2026. On the second, there was another question on the. What was it? Can you? Oh, which bucket?
We don't disclose the buckets. Suffice as to say, I think I've explained this before, we have a very, we have a program. For every six months, and we look down maybe two to three years, what are some of the assets that we could potentially monetize? Of course, this is just our planning. Over time, some markets will probably not allow us to monetize, but there will be some assets that we can move forward. As I explained in examples before, it's a bit like planes taking off. We have a control tower.
Over time, you know, we see if there are some slowdown in a particular flight, then we will see whether we can move any of these projects that we have targeted for monetization in later quarters or six months to move them forward. As I said, we don't give a breakdown on what the different buckets are, but generally, we expect to see this pick up in the second half.
Maybe I touch on-
Yeah, sure.
the second question. First of all, on Real Estate, you asked about the operating loss. I think I did cover that in my address. I'll highlight the points that contributed, you know, to the net operating loss in Real Estate, mainly because this year there was increase in net interest expense. There's also increase in some expenditure on new initiatives. At the same time, I also mentioned about lower returns from some of the sponsors stakes. This includes, for example, interest in Keppel REIT. You have seen the announcement, results announcement from Keppel REIT. This year, they had lower fair value gains from investment properties, so we took a share of that, and that resulted in the lower operating profit for Real Estate.
You also asked about infrastructure. They did very well this year, indeed. We actually have a recurring business, right? We actually also operate a power plant, right? There are recurring income coming from those businesses. Of course, there would still be market movement, so it is a recurring activity, but there would still be market movements like electricity prices. We do actually lock in, as I think Chin Hua mentioned in his opening address, right, in some of the retail contracts, it's locking one to two years. At the same time, we also hedge our gas prices. As a result, we do we have contracted spreads that are sustainable, right?
Of course, market, you are still exposed to market movements beyond a certain period. Yeah. The short answer is, yes, it is a recurring business and is indeed a recurring income.
Maybe I also ask, Cindy, you want to add anything to that?
Sure. The Infrastructure division under Keppel runs an integrated power business, as well as a decarbonization and sustainability solution business. As we have seen in the slide earlier, under our integrated power business, our margin contribution comes from the way we contract our gas, the way we run our generator, in this case, the CCGT, we have four units, and the way we secure electricity retail contract. The contracting strategy, the gas purchase strategy, and the ability to run our generator at high efficiency and high reliability, all contribute to healthy spread. That's one. Under our recurring business for decarbonization and sustainability, we do have long-term O&M contracts.
The ability to improve efficiency in terms of how we run such critical assets, become our secret sauce because of how we reduce OpEx, how we improve uptime, whether in the district cooling plant, in a waste energy plant, as well as, water plant. I think all these add up, and what we see is promising learning curve efficiency that translate directly to the bottom line.
You would have also noted in my speech that I mentioned about the amount of the total quantum of between the EAAS as well as the O&M contracts that as in Cindy mentioned, is about SGD 4.1 billion, and this number is growing. I think these are all indications that, yes, we are in this business. There are some volatility as what Hon Chew said, but at the end, we are making it. It's a recurring business, and we are also changing the business model to allow us to have longer-term contracts that will improve the quality of the earnings. Okay? Yes. All right. Oh, yes.
Yeah. Hi, good evening, Chin Hua . This is Brandon from Citi. Just a few questions. The first one would be on this additional SGD 12.4 billion that you put out as part of the AUM. Can you share with us the speed or timing at which they can be converted into FUM? It seems that SGD 8 billion of this are, like, real estate, and the remaining SGD 5 billion is infra. Yeah, do correct me if I'm wrong.
All right. What's your... You are telling me what the number is?
Yeah. I mean, I'm just trying to confirm whether I'm wrong or right. Yeah, 'cause it seems that a lot is catered towards real estate. Yep, that's my first question.
Yeah.
The second would be the SGD 13 billion of deal pipeline that you've guided. Can you share with us the chances of converting them into actual business or FUM, so to speak? The third one would be for Keppel REIT's DIS. Can you share with us the ROE impact of that and the rationale behind divesting 9%, and why not 15%, why not 20%, and why now? Yeah, thanks.
Okay. I think the first question. I'm trying to now getting old, cannot remember all the questions. First question is on the 12.4. This is how quickly we can. Well, first, what's the composition of this one? You can see that I think that, of course, there are various real assets in there, and these are assets that we have also identified in our monetization, right? You work out, we have said SGD 17.5 billion as a target from October. We have also now announced about SGD 5 billion, so we have so the number kind of tallies quite closely. It doesn't match exactly, but it tallies quite closely.
Some of this would be land bank, you're right, but some of it would also be the asset-backed securities, which are quite a significant part of that. Now, in terms of the pace, I think this would be along the same lines of what we have said, that we expect to get between SGD 10 billion-SGD 12 billion by 2026, which means that we're currently at SGD 5 billion, so we have to do about another, say, you know, between SGD 5 billion-SGD 7 billion over the next three and a half years. That's roughly the pace. Okay. Your next question is on.
SGD 13 billion.
The SGD 13 billion.
Billion of deal pipeline.
Maybe I ask Chris to answer that.
Yeah, sure. Hi, Brandon. On the SGD 13 billion of deal pipelines, I think we are seeing a lot of deals now in infrastructure, in real estate, as well as connectivity sectors, segments. Like in real estate, you know, we have just recently closed a deal in Korea. We're seeing more because of the illiquidity in the market. I think now is a more interesting time to look for deals in the market, given a bit more stress in the system. You will see cap rates actually expansion, which is actually more to the benefit of the buyers. People with dry powder, actually it's the best time to look for deals now.
We are looking at deals across in the key markets, whether it's Japan, in Korea, in Australia, some of these key markets that we are focused on. In infrastructure, I think, we are also seeing quite a lot of interesting deals. We always focus on deals that provide essential services that generate good long-term cash flows for investors. Some of this will be also looking at leveraging on our Keppel's key capabilities. Whether it's in the digitalization area, it's subsea cables, whether it's in, you know, energy transition, working with our Keppel Infrastructure team. These are some of the key focus that we have.
Are you able to share the rate of conversion of this-?
Oh, the rate of conversion?
SGD 13 billion. Yeah.
Yeah, sure. Actually, most of quite a lot of deals we are in negotiations and discussions with the potential buy, sellers right now. We are looking forward to converting quite a number of these deals in the third quarter, as well as in the fourth quarter of this year.
Maybe, Hon Chew, you can answer the question.
Yeah.
on impact on ROE.
Okay.
Yeah.
Sure. We actually had a separate announcement that actually depicts the financial impact, so I will explain using the pro forma that is included there. There will be a one-time impact on net profit. On the pro forma basis, using the 2022 numbers, meaning assuming the DIS was done 1st January of 2022, there will be an impact on the profit. It will be impacted by SGD 135 million on a pro forma basis because Keppel REIT shares are still trading below net asset value, right? That's one component. Of course, if the DIS is done at the beginning of the year, the equity share of profit from Keppel REIT also comes down. There's two elements of the one-time impact, but this is just one time.
Going forward, the IS reduces retained earnings, it will help to enhance our ROE. Yeah.
Your question is, you know, why this particular amount? I think, you know, first and foremost, I would say that Keppel REIT is a very important REIT for the group. We remain very fully committed to Keppel REIT. As part of our capital management exercise, we have looked at how we can monetize some of the assets that we have. This would, if approved, this will become part of the monetization. Instead of selling it, we felt that it actually represents quite good value. The yield, I believe, is about 6.5%.
We thought this would be better that we distribute it in specie to our shareholders, and I hope that many of our shareholders will continue to hold this very good Keppel REIT, very, you know, well managed by a strong management team and a board. Of course, the assets are best in class in Singapore, in Australia, you know. I think for all those reasons, we think that, and of course, as I shared earlier, this would also go towards improving the free flow for Keppel REIT. For all those reasons. I think we are quite sure that this is what we want to hold at this point. I don't see that. You know, to your next question, are there anything planned, if you are thinking about that?
Mm-hmm.
Short answer is no. Nothing is planned for the moment, so we are quite comfortable with this number.
Thank you.
I think Suki was next.
Yep, in front row.
Thank you. Suki from CGS-CIMB. Can I just check on infrastructure? I do understand that you mentioned there's a market movement, and you also mentioned that your contracts are actually contracted for 1-2 years. Is it 1-2 years from 2023 or 2022? That's before I. Like, is it that one?
Okay. Cindy, you want to-
Then the next-
Cindy, you want to address that?
Yeah. I understand that you hedge your gas, 'cause I think gas has been quite all right in terms of the pricing year to date. Do you have gas sale in the division? That's why it actually caused the jump up, or is it purely because of repricing of electricity prices with the retail customers, which include industrial, I suppose? That is, like, first question of whether we just wanna ascertain your SGD 319 million operating profit of infrastructure, whether you will sustain, right? Because in there you have O&M of plants, you have power sale, and probably some EPC recognition somewhere.
Can I stop you there, Suki? Before you go to the second question, I ask Cindy to address it.
Sure. The electricity one to two years that we disclose is this year, starting from, yep, January. Having said that, we are really actively also executing our contracting strategy for next year, which I can't reveal what is the percentage now. Earlier I mentioned our integrated power business. You are right, we also selectively retail gas. I think the important point here about managing the spread is also how we diversify and manage our gas supply, be it pipe natural gas, LNG, and depending on the market situation, we may also opportunistically do spot cargo. As to whether there are margin from gas sales, first half, we don't break down the contribution, because that is our secret sauce to running an integrated power business, to provide that resiliency and minimize volatility in this recurring business.
Sorry, just to clarify that the spot cargo gas sale is included in the operating recurring nature?
When we do spot cargo, gas, if it happen, will be used to generate our generator.
Okay, you don't do, gas sale? You don't sell your
We do retail some excess gas.
Okay. That would just be, like-
Part of our business.
as a recurring business.
Yeah.
Okay, understand. I know that you're growing your energy assets. This business, in terms of revenue, is quite high. How should we look at the profits and margin on that? I know it's long-term contract, but is the profit material-
I-
When will it be material?
Don't think we can share with you then. I mean, that's... You're asking us for the margins, right?
Mm-hmm.
I think the way to look at it is, in one of the slide, we did show the contribution from integrated power business, as well as the contribution from Data Centre+ and sustainability solution business. The key is to show the growing contribution from our EAAS and O&M business. One thing to note is, the new contract that we announced as secure, have not translate to contribution because these are newly secured in the first half. What we can suggest is, as we execute the project, the top line will translate into the bottom line in the next months to come.
... Thanks. I just have 2 more questions. In terms of, I'm sure the property analyst will actually ask a bit more detailed question on this, but just wanted to hear your view on China home sales actually dropped so significantly in 2Q. Whether you think that the recent meeting the government, whether that actually gives you a bit more hope in the sector in China? My last question is: where is the coupon for AssetCo parked?
Maybe Louis...
I'll do the property one first. I think, Suki, very consistent with what you said, we, as mentioned, did see some green shoots in the first quarter, but in the second quarter, it's continued to be challenging. I think we just see a uncertain market ahead. Even though we are always cautiously optimistic, we're also prepared for navigating the market, as I think the other players are. As we do this, I think, we're looking still for opportunities where we can invest with co-investors through funds into the China market, where appropriate. At the same time, we're also investing in things like our Engine Two products. We're launching our senior living business at the end of the year and also looking at sustainable urban renewal.
As you, I'm sure, would have read, it's quite challenging at the moment in China. I think medium to long term, as I as we said in the speech, for those cities that we are looking at, and also for those solutions we are providing on sustainability, we still see a lot of good traction, long term. Hon Chew, you want to touch on that?
Yeah. Right. The interest income on the vendor notes is under other operating income.
In corporate and-
Under other operating income line.
In corporate and others line.
Oh, under corporate.
Okay. Thanks.
Oh, you're asking the segment?
Segment, exactly. Where is it?
Okay.
Sorry. I just have one more last question. I know that you actually had two plots of land sale in Tianjin Eco-City. Are you able to share the profits for the second plot?
Oh, yes.
The first one was SGD 14 million.
Yeah, 14 was the first one.
The second plot, you know
It's not yet recognized.
Okay. Thank you.
Hi, Joy from HSBC. A few questions from me. First of all, just follow up on AssetCo. You've done some impairments prior to divesting. Is there any room for potential writebacks? Would that, you know, affect your sort of earnings going forward on that part? Secondly, on asset management segment, could you share a little bit more on the current LTVs for the existing fund? You also mentioned sort of new funds under marketing. What are the typical fund size that you're looking at? Given how, you know, the fundraising market, could you share a little bit of LPs sort of required returns and color on that? Thank you.
I'll ask Chris to answer the second and third question, but before that, on AssetCo, we can't speculate on writebacks. All I can say is that the credit notes are backed by the, as you know, by the rigs. The rig market has certainly improved. We are starting to see utilization rates for jackups rising to, I believe, 83%. You also have drill ships, new generation drill ships, as high as 97%. We are starting to see. Once the utilization rates go up this high, day rates are also improving.
We are obviously watching this very closely, to see, one, whether we can move forward, the monetization of these, credit notes, and two, whether we can, you know, when, you know, how that would have a positive impact on our PNL. Chris?
Okay, Joy, hi. On asset management, for the private funds, the typical LTV is not more than 60% on a portfolio basis. Typically, we would borrow less than 60% at a portfolio basis. In terms of the kind of fund size that we are looking at for the new funds, basically, for Keppel Sustainable Urban Renewal Funds, for KSURF , Keppel Core Infrastructure Fund, and then for KAIF II, we are probably looking around about $2 billion in terms of fund size. Most of these funds have different current returns. Like for KSURF is more core-plus, whereas KAIF II Infrastructure is more like a value-add fund.
Whereas for, Keppel Core Infrastructure is more focused on yield, with a single digit total return, and that's more evergreen fund in nature. Yeah.
If I just follow up, your stake in these funds, would it be, you know, it, in line with your traditional stakes or?
Yeah, I think, you know, typically, Keppel will always put in our the stake as our quite in the past in traditional stake. I guess where we see that there's actually very interesting opportunities, Keppel will look to actually put more into the funds as well. I mean, right now, we typically follow what we would do as a sponsor stake into each of the funds.
Could you share today, with your existing 50 AUM, what's your sponsor stake?
I think our average is maybe 10 to, actually it's less than that, it's SGD 3.6 billion out of 50.
Thank you.
Yeah.
Maybe if it's okay, we'll take one or two questions from online. I think Derek of DBS has been waiting a while. He has, Derek has three questions. First question: management spoke about better opportunities in the second half 2023. What kind of further discounts to valuation you are anticipating, and which markets and type of asset classes? I think that's something that you have already addressed.
Yeah.
Yeah. Anything else you want to add to this?
No, I mean, Derek, the opportunities are really in all the three sectors that Keppel is good at, whether it's in real estate, infrastructure or connectivity. You know, we are seeing that the market's coming closer towards us. Like, whether it's in real estate, it's probably within cap rates expansion, anywhere between, like, 50, 100 basis points or even upwards of that, all depending on the seller's position. For infrastructure, as we said, we always look at essential services, things with good cash flow. Those we don't look at cap rates expansion, but we always like infrastructure as a asset class, given its CPI index as well. That matches the income and liabilities really well for our investors base.
For connectivity, I think given the capabilities that we have, in-house on data centers, on the subsea and all that, I mean, this is something that is more deals generated by ourselves, by our respective, data center team.
Second question from, Derek, again, maybe for Chris.
Yeah.
What is management's view about setting up a private equity credit fund?
Yeah, Derek, I'm not sure whether you're aware, we actually have a 50% stake in a joint venture with Clifford Capital. It's called Keppel-Pierfront Private Credit Fund. It has raised about $700 million maybe about a year ago. The fund has been very successful, very well deployed. We are probably going to look at starting a new fund 2, credit fund 2 soon.
Private credit is one of the.
Correct.
growth.
Yeah
areas for asset management. Okay, third question: What are your capital partners in your private equity fund saying in terms of deployment strategies? Do they prefer to wait and see, or do they want to deploy now?
I think we are fortunate that we have some of the smartest investors in the world with us. These are all your sovereign wealth funds, your pension funds, and they actually know how to seize opportunities. Whenever we are able to showcase them with a deal that is interesting, whether it's in terms of stability of cash flows or whether it's in terms of value-adding strategies, where they will make good returns, I think that's where they want to join us in terms of partnering us, coming into the fund, as well as co-investing alongside us.
I guess one of the key differentiator for Keppel is that we have a very strong operating capabilities.
Mm.
Our operating platform is able to add value...
Mm
... through their very deep industry knowledge and operating capabilities. The other thing I wanted to add is that I think this is quite recent. I think this week, GIC announced its results. Very good results, by the way, I mean, under the very difficult circumstance. They also mentioned about how to make their portfolio more resilient, and amongst various things, they are looking more at real assets, including infrastructure and real estate. These are areas that Keppel is very focused on, because we are an alternative real asset manager and operator, and our operating capabilities are what makes the difference when LPs look at us. Maybe I go on to another question before I come to the live audience.
This is from Paul Chew of Phillip Securities, Singapore. Are you expecting the electricity reserve margins in Singapore to decline further over the next few years? Will a decline benefit your electricity margins? Can I ask Cindy to respond? Thanks.
The Singapore electricity market is a fully liberalized one, like we all know, so it's a merchant market. I think the past few years, the market has overcapacity, thanks to the overly optimism from the GenCos. Based on projection, by 2025, the electricity market will reach its minimal required reserve margin. This is to CEO's earlier point, as an operating platform player, we must know our market competitive landscape very well. This is why we actually reached final investment decision on the advanced hydrogen-ready combined cycle gas turbine last year. With the collaboration of KAIF II, our infrastructure fund, we managed to reach financial close early this year, and last week we have groundbreaking. This 600, additional 600 MW will come commercial operation by 2026.
Right in time when the electricity market, which is, reserve margin.
There's another question online which kind of related to infrastructure, maybe I will take that as well. This is from Mayank of Morgan Stanley, Singapore. What would be the margin for EAAS contributions once they contribute in 15 months' time? What would be the rough per unit or percentage margin in EAAS? Again, I'm not sure you can answer that.
Yeah. I would like to clarify the 15 months, because I think in 1st quarter I mean, business update, we mentioned we secure about SGD 340 million in contracted revenue. Year-to-date, 1st half, we contracted SGD 1.2 million. That 15 months actually, it's actually less than 15 months. Some would have over the next couple of months, start contributing. In terms of margin, suffice to say, it is healthy, but it's competitive. The key to note is for EAS, we, in our contract, is always inflation resilient, meaning that it will be indexed against inflation. I think that is an important point to note.
Okay, maybe we come back to the live audience. Yes.
Hi, good evening. I'm David Lum from Daiwa. Since you were mentioning recent news flow, the government awarded, like, 4 data centers recently, and Keppel wasn't one of the names. I was a little surprised, but should we read too much into this, or what is your view?
Yeah. Well, I think, we did not participate. We chose not to participate. I'll let Thomas shed some more light.
Thank you, David. As Chin Hua has mentioned, we did not participate in this round. We chose to focus on the opportunities that we already on, been working on, including floating data center module, and a larger scale basis Data Centre+. As well as the Genting Lane project, where we have potentially more capacity that we can bring to the market. It is not that the market is not attractive. It is, it still have very high demand. You heard from Chin Hua's earlier presentation that the AI demand is adding on to the demand that is already very strong in this part of the world, and probably globally as well.
We chose to focus on what we have been working on for quite a while now. Let's see if in the second half of the year, we can make more announcement on new capacity.
You're saying that you have so many exciting projects on the plate that you could give this a miss and it doesn't really matter, and you'll have more opportunities also going forward?
Well, lower hanging fruit, I would say.
Thank you, David. There's another question online, this is from Pei Hwa of DBS. Congrats on the strong AUM growth. Could management shed more color on the bright spots and deal pipeline, given we have SGD 10 billion dry powder? We already covered.
Yeah.
Okay. The second question that Pei Hwa asked: secondly, on real estate, while we have seen strong pickup in China property sales, what's the outlook for en bloc divestment?
Thank you, Pei Hwa, for the question. I think as I mentioned, although the first half for us, we have seen better sales, almost double or more than double from 1,010 to over 2,100. We do see some softness in the market, but you know, that being said, in China, it is not a uniform market. There are micro markets where people are more interested in, and for us, we have been having conversations on a number of our projects, so we will be announcing these when the SPAs have been signed. Thank you.
Hi, I'm Chen Lin from Reuters. We would like to ask, is there any plan for any spin-offs or sell downs in data center in the second half or the near future? Yeah, thank you.
This is, I think we have, of course, in the announcement, we mentioned that Genting Lane. We have the first two buildings are already fully committed. Of course, first building is already built, ready for service. The second building is still under construction. You know, there could be opportunities for us to do something, but we have nothing to announce at the moment. At least the first building is ready. Yes.
Hi, I'm Martin from JP Morgan. Maybe a question for Cindy. The government has threatened to build their own power plant if the private sector doesn't respond. Should we be worried about regulatory response for your power business in Singapore if there is a perception that you're making super abnormal profits currently? Thanks.
The Singapore power market is a very competitive one. It's a function of supply and demand. I think, in terms of regulatory risk, the incumbent players are always in very close dialogues with the regulator. I think our interests are aligned, which is to ensure that the power and the electricity market in Singapore remain resilient in order to attract and support the economy. I think nobody would like, including the regulator, shock in the system. The key is also how we future-proof our generation assets, so improving the efficiency and reducing the carbon footprint to deploying upgradation. For example, we also disclose that, one of our unit, we actually embark on some powertrain upgrades in order to improve the heat rate and the energy efficiency.
I think these are roles and responsibility that Genco should play in order to ensure the regulators support the growth of a vibrant electricity market.
Thank you, Cindy. I think, we'll take another question from the net. It's submitted by Adrian Loh of UOB Kay Hian. Thank you, management, for the presentation and the strong results. Adrian has three question. First question, would it be possible for you to disclose Keppel's remaining stake in Seadrill? Maybe I ask Hon Chew.
Thanks, Adrian. It's actually disclosed in the interim financial statements. You can find that information in note 4. I'll just read it out. The number of shares is actually SGD 3.4 billion. They are the retained consideration shares, of which about SGD 1.5 billion has already been sold, so the remaining stake is about SGD 1.8 billion. The exact numbers are in note 4.
The next two questions, I think Cindy can take. Let me read them out. Regarding your new 600 megawatt, cogen plant, is the gas feedstock from LNG or pipeline? The third question, for the hydrogen component, is Keppel working on the supply chain for that presently? Cindy?
Earlier on, I talked about the supply and demand. There's one detail that I omit to add. The EMA has actually announced that for future planting of generating assets, it will be done via a centralized RFP. For market player like us, we are actually pretty satisfied with this because this will avoid a repeat of, like I said earlier, situation whereby there are over-optimism from excessive planting. That was back in pre-2016, right? Okay. Regarding the gas, as far as we are concerned, whether it's LNG, pipeline or spot gas is gas, so we won't reveal whether the feedstock is from LNG or pipeline.
Suffice to say, we have actually de-risked a good portion of these 600 MW gas molecules in order to ensure that our marginal costs for running the generator to produce the electricity is healthy. The hydrogen component, I think we have been a forerunner in this space. In the course of last year or so, we have been actively sourcing, evaluating, and assessing location where we can produce or procure competitive low-carbon molecule. The key is also then how do we ship or transport such hydrogen into Singapore? Again, this is also not unfamiliar to the sector. We have announced working with big and reputable partners.
For example, in Queensland, we are part of the Central Queensland hydrogen project, joining a team of very esteemed Japanese consortium and Australian state-owned power player. Yeah. Yep, I think we have also shared, we could also work with another very esteemed player, Exxon. We have disclosed also some of their current projects in Texas, low-carbon hydrogen and the like. Thank you.
Okay. Thank you, Cindy. There is a question submitted by a shareholder online, Mr. Tan Choon Kiat. "Hi, Chin Hua. Just to clarify, did you mention just now that Asset Co notes are also earmarked for part of the remaining SGD 12 billion to be monetized?" Yes, I can confirm that. It's included, and the goal will be to monetize it over time. Second question: "Could you also shed some light on the exposure in terms of value that Keppel has in China, such as office, residential, projects and land banks? Will some of these be monetized into the AUM?" Short answer is yes, we will be looking to monetize this into the AUM....
We don't disclose our exact exposure, but I think we've mentioned earlier that, you know, been, we have since 2017, monetized about SGD 3 billion worth of real estate assets in China. Booking a profit of about SGD 1 billion. I think this is all part of our change in business model. As you might know, we in the past had quite a large exposure of buying land and developing residential for sale in China. A few years ago, we changed as part of our Vision 2030 and our focus on recurring income. We started to shift away from lumpy profits, and development for sale was one of them, right?
Besides this monetization, we have also shifted in that period about $5 billion worth of renminbi out of China. Again, this is not a. It's just a strategy, a business strategy. Nothing to do with the outlook for the market. With all of these, you can see that our current exposure in China is much reduced. Of course, you know, we still see opportunities there. As what you've heard from Louis, we are continuing to look for opportunities there. Using our asset-light model now, we are also looking to partner with Chinese funds to invest into some of these opportunities. Yes.
Hi, Marvin again from JP Morgan. Maybe a question for Louis. Congrats on that.
Do you mind you just address the question, I'll decide who answers it?
Oh, yeah, just in regards to Vietnam, residential fund. Congrats on that, new fund. Just trying to get your thoughts on the Vietnamese property market. Are you expecting primary sales to recover in the second half, or is it more 2024? Any updates of, in terms of monetizing your Sports city development? Thanks.
Yeah, Louis.
Sure. I think the market actually still continues to have quite a bit of demand. When people are able to launch their projects, they get taken up actually quite well, even in not very central districts. For us, and for the market as a whole, the issue is getting the construction and sales permits to get the projects going. We have been working closely with the government to progress on these, and we look forward to announcing launches in the future.
Hi, I'm Felicia from The Edge. This is actually a re question. The group is looking to focus on AUM growth and fee income. We just wanted to know if there's any chance that the group would continue to support your listed REITs and trusts, in the event that they need financial support.
You're talking about those, REITs that we are the managers for, right? Short answer is absolutely. I think, as sponsors, we stand behind the REITs that we, you know, we are sponsors of and/or for which we manage.
Sorry, I have one more question. This is specifically on Keppel Pacific Oak U.S. REIT. It is currently trading at a yield of 16.6% and at about 0.37 times its NAV. Would you be able to shed some light on what you think would narrow the discount to its NAV?
I think that's something that you probably have to pose to the REIT. Probably that's the more appropriate place to ask that question. Okay, Des, you have a question? Ziwei. Go ahead.
Yes, thanks. Ziwei from Macquarie. I got a question on M1. Curious to understand how the operating profit for the business actually performed. You stated that your revenue is up 12%. You said there was a higher operating income at M1, but if I'm reading it correctly, the operating income was increased by only 2%. Wondering if there's any offsetting element within that would not have showed a better performance from M1?
Okay, Manjot.
Yeah. Both our operating income and operating profit has grown this year-over-last-year and quarter-over-quarter. Primarily driven by our enterprise business, which is the non-mobile enterprise business, which is ICT solutions, digital transformation solutions. We have 2 subsidiaries, AsiaPac and Glocomp, 1 in Singapore and 1 in Malaysia. Both have grown quite significantly. Our mobile business has also grown basis the strong subscriber growth that we've had. Roaming revenues coming back somewhat. They're still not to the level of pre-COVID days, they are growing. Our income has grown as well as our profit.
Maybe if I can rephrase.
Yeah.
Your revenue for M1 has grown by 12%?
Yes.
Your operating income has only increased by 3%, which implies a sort of like margin compression.
Yeah, but good-
Is it really a drop in margin, or is there some other operating elements from different businesses that's causing the income to be lower than it should be?
I think the dilution of income is because of the enterprise margins being lower than mobile margins. Yeah.
Okay, we have two questions online, which I would like to take. One is, the first one is from Mr. Tan, Mr. Tan Choon Kiat. He's very well informed, so, let me read the two questions. First question, and both these questions I will ask Cindy to respond, please. First question: We recently heard Indonesian officials commenting about Batam Green Corridor and solar energy being exported to Singapore. Any comments?
This is, I think, part of the ASEAN Power Grid ambition. I think, it's quite commonly known that amongst the ASEAN member state, there has been an aspiration to form an ASEAN power grid. In fact, to this end, Keppel is a forerunner. We have successfully imported hydroelectric from Laos via the Laos, Thailand, Malaysia, Singapore Power Interconnect Project or LTMS-PIP. We have successfully crossed a full year, full anniversary year, importing about 260 GWh of hydroelectric across ASEAN borders. I think this Batam Green Corridor is also a potential for renewable from Indonesia to come to Singapore. I think, this will help accelerate renewable adoption across the region and, more importantly, enhance the resiliency of the power grid in the region.
Thank you, Cindy. There's a second question from Mr. Tan. Keppel Sakra Power Plant is hydrogen-ready, but will this plant be ammonia-ready, given that ammonia is an easier gas to be transported than hydrogen, and as ammonia is commercially available from your partner in Incitec Pivot?
Besides our Keppel Sakra Cogen Plant, which is hydrogen-ready, I must add that I mentioned earlier, last year we performed a powertrain upgrade in one of our units of power generation asset. In fact, that unit is also hydrogen-ready with a bit of modification. The part on ammonia is correct. Ammonia is a mean to transport hydrogen, because we know hydrogen as a gas is very difficult to transport and store. Ammonia is a source or form of vector to carry hydrogen. To this end, again, we started actually feasibility study of developing and producing ammonia with Incitec Pivot and Temasek back in late 2021, which we have also announced.
I think as based on our feasibility study, it has demonstrated very high commercial and technical feasibility of importing hydrogen via ammonia as a vector. Now, as to whether Sakra plant is ammonia-ready, there could be potential for us to crack, or should I say, release hydrogen from the ammonia in order to fit in the Sakra plant. I don't think that is what we would like to do, because it will be energy inefficient. We were actually in the process of developing ammonia-fired power plant. In this case, ammonia as a fuel can be used directly. That's number one.
Number two, ammonia can also be used as a fuel for other users, such as maritime transportation, decarbonization, in terms of bunkering fuel, or it can be used as a chemical feedstock in our entire Jurong Island energy and chemical hub. So the key is to find vectors with a lot of diversified use and complementary demand.
Okay. Thank you, Cindy. I answer one, take one more question from the web before I come back to you, Yuki. This is submitted by an investor, Mr. Xiao Ming Liang. "Hi, Chin Hua and the Keppel team. Thank you for the strong results for first half 2023. I have two questions. Is the distribution of Keppel REIT considered part of the asset monetization program?" Yes, it is part of the asset monetization program. We have also said, I think asset monetization is a very important part of our growth strategy, because we need to release some balance sheet space that we can grow our AUM, we can invest into these new growth areas that we see. Of course, also to reward our shareholders.
This distribution of Keppel REIT would not only just be a monetization program, but it will actually go towards rewarding our shareholders directly. Second question: "What is the timeline of the distribution of Keppel REIT units to shareholders?" We will need to go through an EGM, so for it to be approved first. I think the announcements will come out shortly. We expect that this will be done in the course of the next few months, right? There's a question from the floor? Yes.
Yeah, it's Brandon again.
Yes.
Just going back to the Keppel shares, right? To me, given that this wasn't factored in as part of the SGD 0.15 DPS, when we look at the FY 2023 DPS, should we consider this as a part of it, or it's just bonus?
It's a special dividend, so we would not include that when we look at the payout ratio.
Okay. Okay, thanks. One more on, what's your thoughts on share buyback? Yeah.
Well, you have known, we have actually, not too long ago, run a share buyback, about SGD 500 million. Right now, I think we are, you know, we have these treasury shares. Part of it is for our staff, but also, you know, it's quite a lot. Part of it would be also for, you know, when we do M&A, particularly for, you know, potential, say, asset management platforms. In order to align interests, with the acquired, the employees of the acquired platform, these shares will come in handy as a currency. If you see us doing some M&A, then you know that, you know, we might think, I say, we might think about the next share buyback.
Just one last one, right? I think you earlier mentioned that you would save some of your best assets for your dedicated vehicles, and I understand that Keppel South Central has been put out in the market, a 50% stake. Does it mean that if it doesn't get transacted, then it will be so-called given to some of your other product funds or REITs?
I don't think we give la.
Let me for a better word, yeah.
I can't remember the last time we give anything. We do give to shareholders, because they are shareholders. I think, we are, you know, obviously, always looking at opportunities, you know, so to monetize. There's a possibility that we could sell it to the REIT, but it has to make sense for both the REIT and for us, for Keppel.
Hi, can I just check on the likelihood of Marina East water transaction being concluded? It's been more than a year, whether there's a chance of it not getting its approval. We also noted that, I think in May, you actually had cancel a Flemmington transaction. Just wondering whether, you know, this is safe?
We believe so. It's in process.
Thank you.
Oh, there's one more question.
Thanks. Peggy from Phillip. It's just an accounting question for Hon Chew. When you distribute your type of REIT, right? For your remaining stake, do you have to market to market for the valuation, your balances?
No, no.
You still do-
We continue to equity account as associates.
Uh.
That does not change.
Okay, thank you.
If there are no further questions, thank you all for attending this, and for your very, robust, Q&A. Thank you very much. For those of you who are here, please join us for. Management will be around, so if you have any extra questions that you'd like to ask. Thank you.