Keppel Corp posts higher Q1 profit; 3 out of 4 key segments fare better

MAINBOARD-LISTED Keppel Corporation : BN4 0% logged higher net profit for the first quarter ended March from a year ago with 3 key segments putting up a better showing, except for urban development.

Group revenue grew 9 per cent to S$2.07 billion year on year, led by higher contributions from the energy & environment segment. The other key segments, asset management, and connectivity, also registered improved performance, said Keppel in a Q1 business update on Thursday (Apr 21).

The diversified firm’s property development arm, Keppel Land, saw net profit dip in the three-month period owing to lower contributions from China property trading projects and en bloc sales. The urban business was the largest contributor to Keppel’s bottomline in FY2021.

“In China, sentiments have turned more cautious after the debt crisis affecting developers. The recent lockdowns have also caused some short-term disruptions to operations in affected cities. Nevertheless, we remain optimistic and confident about opportunities in China over the mid to long term, driven by continuing economic growth and urbanisation trends,” said Keppel chief executive Loh Chin Hua.

At the company’s earnings media briefing, he said: “I don’t think you should necessarily look at the first quarter as an indication...for the full year. It is true that it is more difficult in some of the markets, for example in China, so our first-quarter sales are affected but it’s also partly because we don’t have launches until the later part of the year.”

Loh was responding to a question about the potential impact on the group’s property business in China as the world’s second-largest economy faces growth headwinds amid lockdowns under its zero-Covid approach.

“Vietnam is doing quite well. (So), we can’t paint everything with the same brush. We are still actively looking to invest...in China,” he said, adding that the Chinese market remains resilient in Tier 1 cities despite the lockdowns.

“We have accumulated landbank in markets like Vietnam and China over long periods...the market value of the landbank end of last year is significantly higher than our carrying cost so we remain sanguine that things will pan out. Even if market conditions remain difficult or get worse, we have this head room.”

Keppel Land sold 540 homes in Q1 2022, compared to 1,360 homes a year ago, due mainly to the timing of new project launches slated for later this year. It has sales of some 7,470 overseas units worth around S$4.4 billion to be recognised from Q2 2022 to 2025.

Higher productivity coupled with continuous efforts to streamline operations and maintain a lean cost structure led Keppel Offshore & Marine’s (Keppel O&M) losses to narrow significantly over the period. Keppel O&M also posted positive earnings before interest, taxes, depreciation, and amortisation (Ebitda) on the back of “higher levels of activity as it executes its sizeable orderbook”, said the firm.

Loh reiterated an earlier announcement by the company that there was “good” progress in the discussions on the proposed merger of Keppel O&M and Sembcorp Marine; similarly too for the sale of Keppel O&M’s legacy rigs and associated receivables to an Asset Co, which would be majority owned by external investors. A definitive agreement is set to be sealed by Apr 30.

“It is a very complex transaction. We are getting to dotting the i’s and crossing the t’s."

Keppel noted that year-to-date, it has announced S$332 million in asset monetisation, including the divestment of the group’s interest in Keppel Logistics as it continues to advance its asset-light strategy.

On whether Keppel was looking at other targets following its failed bid to acquire Singapore Press Holdings (SPH), Keppel Capital CEO Christina Tan replied: “There are actually so many acquisitions that we’re looking at. Because we are a global manager, we don’t just look at Singapore acquisition...there are a lot of targets out there.”

Shares of Keppel Corp closed flat at S$6.65 on Thursday before the business update.