KEPPEL CORPORATION LIMITED (SGX:BN4)
Keppel Corporation - Re-Orienting For The Future
- O&M to face very challenging conditions in near future.
- Finalising 2030 strategy.
- Focus still on Temasek offer.
21% fall in Keppel Corp's net profit in 1Q
- Although Keppel Corp (SGX:BN4) reported a 21.3% y-o-y rise in revenue to S$1.86b in 1Q20, the group saw a 20.9% fall in net profit to S$160.5m in the quarter, partly due to the absence of gains. See Keppel Corp Announcements.
- Recall that 1Q19 results were boosted by gains from the divestment of a 70% interest in Dong Nai Waterfront City, Vietnam a year ago.
- Net gearing inched up from 0.85x as at end FY19 to 0.88x as at 1Q20.
Segmental breakdown; infrastructure boosted by one-off gains
- The Offshore & Marine division reported net profit of S$3m for 1Q20 vs. a net profit of S$6m a year ago, mainly due to the share of losses from associated companies which had offset the division’s stronger operating results. Net order book was S$4.0b as at end Mar 2020, of which renewables and gas-related solution accounted for more than 70%.
- As for Property, the division’s net profit of S$35m was 73% y-o-y lower mainly due to the absence of gain from the disposal of Dong Nai a year ago. In 1Q20, Keppel Land sold 450 homes, which was 15% higher compared to 1Q19; China contributed over 70% of sales volume, with more than 200 homes sold taking place in Feb and Mar, after the COVID-19 outbreak.
- As for Infrastructure, net profit was higher at S$174m in 1Q20, compared to S$16m in 1Q19, mainly due to a mark-to-market gain of S$131m from the reclassification of the group’s interest in Keppel Infra Trust (SGX:A7RU) from an associated company to an investment. Excluding this, Keppel Infrastructure’s earnings doubled compared to a year ago.
- Investments registered a net loss of S$52m in 1Q20 vs. a net profit of S$49m in 1Q19 with the absence of one-off gains, as well as mark-to-market losses on some investments.
Finalising Vision 2030 strategy
- Keppel Corp is finalising its Vision 2030 strategy, and shared that it has commenced a strategic review of its logistics business.
- We update our estimates and with the lower oil prices, the outlook for the O&M sector looks increasingly murkier, and our fair value drops from S$7.58 to S$7.16.
- Meanwhile, investor focus will remain on the voluntary pre-conditional offer by Temasek to acquire an additional 30.55% stake in Keppel Corp.
- See Keppel Corp Share Price; Keppel Corp Target Price; Keppel Corp Analyst Reports; Keppel Corp Dividend History; Keppel Corp Announcements; Keppel Corp Latest News.
OCBC Research Team
OCBC Investment Research
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https://www.iocbc.com/
2020-04-30
SGX Stock
Analyst Report
7.16
DOWN
7.580
