Keppel vs Sembcorp Industries: Which blue chip stock is a better buy with the pullback

What happened?

Not all Singapore blue-chip stocks have kept pace with the Straits Times Index (STI) rally. 

Earlier this year, I was watching both Keppel and Sembcorp Industries as they stood out among the stronger performers in the Singapore market.

Sembcorp was previously one of the top-performing Singapore blue-chip stocks, while Keppel also drew attention after raising its dividend and ranking among the best-performing blue chips earlier in the year.

More recently, the M1-Simba fallout raised questions over whether M1 could continue contributing meaningfully to Keppel’s dividends. 

Since then, shares of both Keppel and Sembcorp have lagged the Straits Times Index.

Year-to-date as at 7 July 2026, Keppel gained 5.8% while Sembcorp declined 5.3%. In comparison, the STI rose 14.7%. 

This has led to discussions within the Beansprout community on which stock offers the more attractive opportunity following the recent pullback. 

In this article, I compare Keppel and Sembcorp across revenue and earnings growth, balance sheet strength, return on equity and AI infrastructure exposure to see which stock looks more attractive after the pullback.

Keppel vs Sembcorp: Which has stronger earnings momentum? 

The first metric I look at based on Beansprout's checklist for evaluating growth stocks is whether the company is still delivering growth in both revenue and earnings.

On this front, Keppel appears to have stronger growth momentum.

Keppel’s FY2025 revenue increased 3% year-on-year to S$5.98 billion, while earnings per share (EPS) from continuing operations rose 28% year-on-year to S$0.56. 

This suggests that Keppel’s earnings grew much faster than revenue, supported by better margins, operating leverage and cost discipline as its asset-light strategy gained traction. 

A key contributor was Keppel’s Connectivity segment, where revenue rose 73.9% year-on-year to S$953 million. 

.The segment benefited from acquisition-led growth, higher recurring data centre management income, and stronger contributions from asset management fees and performance fees from its data centre funds.

Keppel’s data centre platform also provides a longer runway for growth.

Management has estimated that its fully developed pipeline can support around S$10 billion in data centre funds under management over time.

As demand for AI-related digital infrastructure grows, this may become a more meaningful source of recurring fee income for Keppel.

In comparison, Sembcorp reported FY2025 revenue of S$5.8 billion, down 10% year-on-year. 

The decline reflected lower electricity and gas prices in Singapore, weaker customer demand in the UK, and a lower contribution from its gas business. 

Despite the decline in revenue, Sembcorp demonstrated resilient profitability. 

Net profit before exceptional items and foreign exchange movements declined by just 1% year-on-year to S$1.0 billion, while EPS before exceptional items and FX effects slipped marginally by 1% to S$0.564 cents.

The resilience in earnings was supported by growth in its renewables business. Renewable operational capacity increased from 13.1GW to 15.0GW during FY2025, while the company added another 5.4GW of projects under construction to support future growth. 

Sembcorp also continues to benefit from structural tailwinds from electrification, decarbonisation and artificial intelligence (AI) infrastructure demand.

While both companies continue to benefit from long-term structural trends, Keppel currently demonstrates stronger earnings momentum, while Sembcorp’s results highlight resilient earnings despite pressure from its gas business.

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Keppel vs Sembcorp: Which has the stronger balance sheet? 

The second Opportunity Pot screen evaluates financial resilience through leverage levels.

For this metric, we prefer companies with net debt-to-equity below 1.0 times. This gives the company more flexibility to fund growth, manage interest costs and navigate periods of market uncertainty. 

Keppel reported net debt of S$9.1 billion and total equity of S$11.2 billion as at FY2025, translating into a net debt-to-equity ratio of 0.82x, which is below our preferred threshold. 

Keppel’s balance sheet has remained healthy even as the company expands its data centre, infrastructure and connectivity platforms. 

Its asset-light model also helps. By recycling capital and bringing in third-party investors for large-scale projects, Keppel can pursue growth opportunities without relying solely on its own balance sheet. 

On the other hand, Sembcorp reported net debt of S$7.85 billion against shareholders' equity of S$5.87 billion.

This translates to a net debt-to-equity ratio of about 1.34 times, which is above our preferred threshold. 

That said, Sembcorp’s higher leverage needs to be viewed in the context of its business model.

Utilities and renewables are more capital-intensive businesses, and Sembcorp has been investing in growth projects, renewable energy capacity and strategic assets such as Senoko Energy.

The company also has a manageable debt profile, with S$8.2 billion of unutilised borrowing facilities, 76% of borrowings on fixed rates, and an average debt maturity of 5.2 years.

While Sembcorp’s balance sheet does not appear stretched in the near term, it does not meet our balance sheet hurdle under the Opportunity Pot framework.

Keppel vs Sembcorp: Which generates better returns for shareholders? 

A strong business should not only grow, but also generate healthy returns on the capital invested by shareholders.

For the the third check for the Opportunity Pot, I use return on equity, or ROE, as a key measure. Both companies comfortably exceed our ROE hurdle. 

Keppel delivered an ROE of 18.7% in FY2025, improving from 14.9% in FY2024 as its asset-light strategy continued to gain traction. 

Sembcorp generated an ROE of 17.9%, slightly below the 20.3% achieved in FY2024 due to softer gas margins and earnings dilution from projects under development. 

However, Sembcorp’s reported ROE may understate its longer-term earnings potential.

Management noted that after annualising the contribution from projects commissioned during FY2025 and excluding capital tied up in projects under development, normalised group ROE would have been around 20%.

As more renewable projects are completed and start contributing a full year of earnings, Sembcorp’s returns could improve over time.

Overall, Keppel passes all three Opportunity Pot screens, while Sembcorp passes two out of three.

You can learn more about how to find better growth stocks using Beansprout's checklist here. 

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Keppel vs Sembcorp: Which has better AI infrastructure exposure?

Passing the quantitative screens is only the first step.

After screening them through the quantitative metrics, we then dive deeper into Keppel and Sembcorp to assess the quality of the business model, competitive advantages and long-term growth opportunities.

Both Keppel and Sembcorp stand to benefit from the growth in AI infrastructure. However, their exposure to this theme is different.

AI infrastructure is not just about electricity demand. It also requires data centres, power solutions, cooling systems, connectivity assets, financing structures and operating expertise.

This is where Keppel’s broader platform gives it a more diversified way to participate in the AI infrastructure value chain.

Keppel: Broader exposure across the AI infrastructure value chain 

#1 - Power and energy infrastructure 

Keppel’s Infrastructure division gives it exposure to the power generation, cooling systems and energy infrastructure needed to support AI deployment.

As digital infrastructure becomes more power-intensive, demand for reliable and cleaner energy solutions is likely to grow.

To stay relevant, Keppel has been expanding generation capacity, cross-border renewable energy imports and lower carbon energy. 

Keppel’s hydrogen-compatible Keppel Sakra Cogen Plant is a 600 MW state-of-the-art advanced combined cycle gas turbine power plant. It is the first in Singapore and will deliver top-tier energy efficiency and performance. 

Keppel has positioned itself early across the digital infrastructure value chain, through cleaner energy, data centre and subsea connectivity.

#2 - Data centres and connectivity 

Keppel is also directly involved in developing, owning and operating data centres across key markets globally. 

During FY2025, Keppel expanded its data centre powerbank across Asia Pacific to more than 1.0GW, including securing a prime site near Melbourne earmarked for a future 720MW AI data centre campus.

Beyond providing physical space for AI computing, the company also develops supporting infrastructure such as power and cooling systems that are critical for high-density AI workloads.

As demand for AI computing accelerates, Keppel stands to benefit from rising demand for data centre capacity from hyperscalers and enterprise customers.

#3 - Capital recycling and asset management 

One of Keppel's biggest competitive advantages is its ability to mobilise third-party capital to fund growth opportunities.

Rather than relying solely on its own balance sheet, Keppel can develop assets, recycle capital and bring in institutional investors through its funds platform. This allows the company to continue expanding while earning recurring asset management and performance fees.

This capability is particularly important in AI infrastructure, where projects are increasingly large and capital intensive.

Sembcorp: Direct exposure to power demand and renewables 

#1 - Spark spreads and Singapore power demand 

Sembcorp’s AI exposure is more directly linked to electricity demand. 

For its Singapore gas-fired power business, profitability is heavily influenced by spark spreads, which measure the difference between electricity selling prices and fuel costs.

While demand from data centres may increase electricity consumption over time, earnings remain sensitive to movements in electricity prices, fuel costs and the pricing of contracts that are renewed.

For example, management has guided that FY2026 earnings from its gas business will be affected by lower margins on newly contracted volumes in Singapore as existing contracts are renewed at lower spreads. 

This highlights the cyclical nature of earnings in the power generation business.

#2 - Renewable energy

Sembcorp has built one of Asia's largest renewable energy platforms, with 15.0GW of installed renewable capacity and a further 5.4GW under construction as at the end of FY2025. 

This gives Sembcorp exposure to long-term trends such as electrification, decarbonisation and demand for cleaner power. 

However, future earnings growth will therefore depend heavily on the successful execution and commissioning of these projects.

The company is also exposed to factors such as curtailment risk, regulatory changes and tariff pressures, particularly in markets such as China where profitability has recently come under pressure. 

#3 - Power purchase agreements

A significant portion of Sembcorp's earnings visibility comes from long-term power purchase agreements and contracted electricity sales.

These agreements provide stability and recurring cash flows, supporting investments in new projects and helping to reduce earnings volatility.

Examples include long-term renewable energy agreements with customers such as data centre operators and industrial users, as well as long-duration contracts supporting its gas and renewable assets. 

While these contracts improve earnings visibility, growth remains dependent on Sembcorp’s ability to secure new contracts and deploy capital into additional projects at attractive returns.

Sembcorp supplies power to industrial customers and data centres and has secured additional power supply agreements with major semiconductor manufacturers such as Micron, which indirectly benefits from AI demand.

In the long term, Sembcorp benefits from supplying significant amounts of electricity to power data centres, semiconductor manufacturing and industrial facilities. Management has also highlighted AI-driven data centre demand as an important future growth driver for Singapore's power market.

Overall, Sembcorp remains more exposed to commodity cycles and project execution risks compared to Keppel's asset-light, fee-based growth model.

Keppel vs Sembcorp valuation: Have share prices priced in the growth?

Although both stocks have lagged the STI recently, valuations are still above their historical averages.

This suggests that the market may already be pricing in a fairly positive outlook for earnings growth, dividends and exposure to long-term themes such as AI infrastructure, data centres and energy demand.

Keppel is currently trading at a price-to-earnings ratio of 19.2x, above its historical average of 9.4x. Its price-to-book ratio of 1.86x is also above its historical average of 0.86x.

Sembcorp is currently trading at a price-to-earnings ratio of 11.5x, above its historical average of 9.8x. Its price-to-book ratio of 2.03x is also above its historical average of 1.14x.

Based on valuation alone, Sembcorp appears cheaper on a price-to-earnings basis.

However, Keppel’s higher valuation may partly reflect its more asset-light business model, capital recycling capabilities and broader exposure across the AI infrastructure value chain.

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What would Beansprout do?

Both Keppel and Sembcorp are high-quality Singapore companies with attractive long-term growth prospects.

Keppel offers exposure to AI infrastructure, data centres, connectivity and asset management, while Sembcorp is more directly linked to power demand, renewable energy and Singapore’s energy security needs. 

However, after screening both companies, I would lean towards Keppel if I were looking to add a stock to the Opportunity Pot within Beansprout’s four pots of wealth today. 

This is based on Beansprout's checklist for evaluating growth stocks which looks at revenue and earning momentum, balance sheet strength, and return on equity.

Keppel has shown stronger earnings momentum, with revenue and EPS growth in FY2025.

It also has a stronger balance sheet, with net debt-to-equity below our preferred threshold.

Sembcorp still generates attractive returns on equity and remains well positioned for long-term demand from electrification, renewables and data centre power needs.

However, its higher leverage and more capital-intensive business model mean that it does not screen as cleanly under our Opportunity Pot screening framework.

The key difference for me is the business model.

Keppel has a broader and more capital-efficient way to participate in the AI infrastructure theme through data centres, power solutions, connectivity assets and capital recycling.

Sembcorp’s exposure is also attractive, but it remains more tied to spark spreads, renewable project execution and capital deployment.

This does not mean I would ignore Sembcorp. I would continue to watch whether its renewables pipeline can translate into stronger earnings growth, and whether power market conditions remain supportive.

As for Keppel, I would watch whether its valuation can be justified by continued earnings growth and successful execution of its data centre and infrastructure pipeline.

Looking at the Singapore market as a whole, we still think Singapore stocks are worth looking at in 2026.

Keppel and Sembcorp reflect two structural themes we are watching in Singapore stocks: AI and data centre growth, as well as energy security.

Keppel offers broader exposure across the AI infrastructure value chain, while Sembcorp is more directly linked to power demand and renewable energy.

But these are not the only themes we are watching. Beyond these themes, we are also watching other long-term opportunities in the Singapore market, including food security, Singapore’s rise as a wealth management hub, and continued infrastructure spending. Find out more about the 4 growth themes we are watching in Singapore stocks here.

For investors looking for more higher-conviction ideas, you can explore our curated stock opportunities here. 

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