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What Investors Can Learn About Keppel Corporation from Its Latest Deal

Keppel Corporation Keppel Corp

Keppel Shipyard Ltd, a wholly-owned subsidiary of Keppel Corporation (SGX: BN4), announced this week that it has obtained a conditional contract from Golar LNG Ltd to perform a first-of-its-type-in-the-world conversion of the latter’s LNG (Liquefied Natural Gas) carrier into a Floating Liquefaction Vessel (FLNGV).

Although the impact on Keppel Corporation’s earnings will not be material for this project, it does give hints to investors on the future of Keppel Corporation.

Who is Golar?

But first, who’s Golar LNG? It’s a global LNG shipping company with a focus on LNG transportation and midstream floating solutions. The company is linked to John Fredriksen, a self-made shipping billionaire and Cyprus’ richest man.

The deal

Keppel Corporation has already helped convert two of Golar’s LNG carriers into Floating Storage and Regasification Units (FSRU) in the past. The FLNGV in the new contract will be the first floating LNG production vessel in the market and have a capacity of up to 2 million tonnes per annum. The vessel is expected to be completed by early 2015. Golar LNG also has the option to convert two more vessels with Keppel Corporation under the same terms.

What does this mean for Keppel?

There are current worries amongst investors that Keppel Corporation’s offshore arm, Keppel Offshore & Marine, is facing increasing competition from Chinese shipyards. However, what the company has demonstrated here is that it is always looking to outdo its last achievement and has its eyes fixed on the road ahead.

The contract also highlights the beauty of Keppel Offshore & Marine’s employees and their ability to constantly seek new revenue streams for the overall corporation. This is also evident in the way Keppel Corporation has transformed itself from a business that had only a lone shipyard; today, it’s into real estate, finance, telecommunications, offshore oil & gas, and infrastructure.

Foolish Summary

We might never know for sure how Keppel Corporation will look like 20 years down the road. But that’s the point – the company is never sitting still.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.