Keppel Limited, previously Keppel Corporation is a Singaporean conglomerate headquartered in Keppel Bay Tower, HarbourFront. The company consists of several affiliated businesses that specialises in property, infrastructure and asset management businesses.
Things To Take Note:
Keppel's Q1 revenue is down 6.3% to S$1.5 billion; legacy O&M assets a drag on net profit.
Net profit down; but if these legacy assets were excluded, it would be up, driven by stronger performance in the infrastructure and connectivity segments.
Shares in Keppel closed 8 cents higher or 1.14% up at $7.11 on April 24.
Shares of Keppel dropped as much as 3.8 per cent in early trading on Thursday (Apr 25) after reporting lower year-on-year net profit and revenue for Q1 FY2024.
What You Need To Know:
Year-to-date (ytd), the group has raised $436 million in equity and conducted some $1.1 billion in acquisitions and divestments.
Over $14 billion in assets and mergers and acquisition (M&A) deals are being pursued within the same period.
Keppel has reported revenue for continuing operations of $1.5 billion in the 1QFY2024 ended March 31, 6.25% lower than $1.6 billion in the corresponding quarter the year before. The revenue saw higher contributions from its infrastructure and connectivity segments which offset the lower revenue from its real estate segment.
While no numbers were revealed, the group said that net profit for the quarter fell y-o-y including the effects of its legacy offshore and marine (O&M) assets and mitigated by stronger performances from its infrastructure and connectivity segments. Excluding its O&M assets, net profit improved y-o-y.
The group also reported a 51% y-o-y growth in recurring income for the quarter driven by stronger contributions from asset management and operating income.
During the quarter, asset management fees grew by 52% y-o-y to $88 million with improvements across infrastructure, real estate and connectivity and including higher performance fees from Keppel Infrastructure Trust A7RU 0.00% (KIT).
Year-to-date (ytd), the group has raised $436 million in equity and conducted some $1.1 billion in acquisitions and divestments.
Over $14 billion in assets and mergers and acquisition (M&A) deals are being pursued within the same period.
Keppel also reported the monetisation of about $170 million in assets including the proposed divestment of a residential project in Wuxi, China. The move brings Keppel’s cumulative asset monetisation to over $5.5 billion since October 2020. The group is focused on achieving $10 billion to $12 billion in asset monetisation by the end of 2026. Keppel also received a cash payment of $71.3 million from Asset Co.
As at March 31, Keppel's net gearing stood at 0.9 times, unchanged from Dec 31, 2023. About 64% of Keppel’s borrowings were on fixed rates with an average cost of funds of 3.81% and a weighted tenor of about three years.
Key Insights
Keppel's estimated fair value is S$7.25 based on Dividend Discount Model.
Keppel's S$6.84 share price indicates it is trading at similar levels as its fair value estimate.
The S$8.10 analyst price target for BN4 is 12% more than our estimate of fair value.
SWOT Analysis for Keppel
Strength
Earnings growth over the past year exceeded the industry.
Debt is well covered by earnings.
Weakness
Earnings growth over the past year is below its 5-year average.
Dividend is low compared to the top 25% of dividend payers in the Industrials market.
Opportunity
Annual earnings are forecast to grow faster than the Singaporean market.
Good value based on P/E ratio and estimated fair value.
Threat
Debt is not well covered by operating cash flow.
Paying a dividend but company has no free cash flows.
Revenue is forecast to grow slower than 20% per year.
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