Keppel has reported a net profit of $304 million for 1HFY2024 ended June 30, 91.6% lower compared to the $3.6 billion in the corresponding period a year ago. Last year’s earnings included $3.2 billion from discontinued operations, mainly thanks to the $3.3 billion gain netted from the sale of Keppel Offshore & Marine (O&M).
Net profit from continuing operations for 1HFY2024, however, was still down by 31.6% y-o-y due to Keppel’s legacy O&M assets, which saw a deeper loss of $209 million compared to $36 million in 1HFY2023.
Of the total loss, about $67 million was due to the fair value losses on Seatrium’s shares. Another $34 million was from Keppel’s associates, Floatel and Dyna-Mac, while the remaining $108 million was attributed to vendor notes, said CFO Kevin Chng at Keppel’s results briefing on Aug 1. He adds that Seatrium’s shares, which are “relatively volatile”, have done “very well” over the last couple of weeks. As at Seatrium’s closing price of $1.68 on July 31, Keppel would have had a return of $21 million instead.
Excluding the effects of the legacy O&M assets, Keppel would have had a net profit of $513 million from continuing operations, 7% higher y-o-y, as all segments remained profitable. In particular, the group’s infrastructure and connectivity segments saw y-o-y growths of 24.7% and 105.4% y-o-y respectively, offsetting the 30.6% y-o-y decline in its real estate segment.
During 1HFY2024, Keppel’s recurring income rose by 14% y-o-y to $388 million, making up 76% of its net profit compared to 71% in 1HFY2023. The higher recurring income was due to higher contributions from the group’s asset management income, which more than doubled to $75 million, as well as operating income, which rose by 1% y-o-y to $313 million. By segments, recurring income was aided by stronger infrastructure and connectivity earnings.
Asset management fees surged by 75% y-o-y to $203 million due to growths in all three segments while funds under management (FUM) grew by 55% y-o-y to $85 billion due to a mix of organic growth and from the Aermont acquisition.
See also: Plaza Premium elevates travel experience by constantly fine-tuning F&B offerings
Monetisation goals
With its aim to go asset-light, Keppel has announced another $280 million of divestments for 1HFY2024. Excluding the divestment of Keppel O&M, the group has announced over $5.6 billion in asset monetisation since October 2020.
“We remain focused on working towards our interim monetisation target of $10 to $12 billion by the end of 2026. Asset monetisation is a key pillar of our Vision 2030 goals, and we will look for opportunities to re-accelerate this when market conditions improve,” says CEO Loh Chin Hua, reiterating his stance from Keppel’s results for the FY2023 announced on Feb 1 this year.
At the briefing on Aug 1, Loh said that Keppel will keep looking for the right opportunities to reaccelerate its monetisation.
However, the group will need to find the right areas to do so. For instance, within Keppel’s real estate segment, the team is looking at asset monetisation opportunities in Singapore and Vietnam. Meanwhile, the Chinese market remains “tough”, Loh adds.
On the progress of monetising its O&M assets, Loh says that the group is “very focused” on monetising these assets “sooner rather than later”.
“A few results briefings ago, someone asked me how much profit we can make from this. And I think my reply then, and my reply now, is: our focus is really on monetisation. If we make some profit along the way, that’s a bonus, because these are legacy assets. They are not our core business. So our goal is to monetise as soon as we can,” he notes.
“But having said that, I think we also can see that it takes time for the offshore market to improve or recover… and we are really seeing [that] all the signs [pointing] in the right direction. Capex [capital expenditure] from oil majors are likely to increase and we are also seeing that energy transition will continue, but it will take place together with fossil fuels. So rigs are still required,” he adds. “The rigs that we have, they represent the most advanced generation rigs that’re available in the marketplace. The utilisation rates also have improved tremendously. They are all in excess of 90%. And the general rule of thumb in the industry is that when you see utilisation rates hit 85% and above, charter rates will usually go up. We’ve seen that happen as well.”
China strategy
With the prolonged weakness in the Chinese property market, Loh said that China is still a market that the group “strongly believes in” for the medium to longer term despite its current challenges.
To stay ahead of Singapore and the region’s corporate and economic trends, click here for Latest Section
“We think there’s still a lot of opportunities there,” he says.
“We believe what China needs today is quite different from when we first entered the market 30 years ago,” he adds, referring to last year’s announcement that it revised its playbook for China.
“[We are] moving more towards what we believe China needs today compared to what it was before. More importantly, areas where Keppel can make a positive contribution… like energy transition, data centres etc. And you would have seen that we just recently announced energy-as-a-service, which is our breakthrough contract with Perennial in China. So we are starting to embark or starting to execute on this new playbook. But it takes time, it’s not just going to happen overnight,” he adds.
