Keppel Corporation Limited (SGX: BN4) is one of the cool companies in Singapore that shares webcasts and/or transcripts of their quarterly earnings presentations (the link for Keppel Corporation is here). Keppel Corporation organizes its business into four different units: Offshore and Marine; Infrastructure; Property; and Investments. You can read more about the firm in here and here. With that, below are eight useful things I learned from reading the transcript of Keppel Corporation’s earnings presentation for its recent third-quarter results release: In his opening address, Keppel Corporation’s Chief Executive Officer Loh Chin Hua highlighted China’s economic slowdown. The middle kingdom’s GDP (gross domestic…
Keppel Corporation Limited (SGX: BN4) is one of the cool companies in Singapore that shares webcasts and/or transcripts of their quarterly earnings presentations (the link for Keppel Corporation is here).
With that, below are eight useful things I learned from reading the transcript of Keppel Corporation’s earnings presentation for its recent third-quarter results release:
- In his opening address, Keppel Corporation’s Chief Executive Officer Loh Chin Hua highlighted China’s economic slowdown. The middle kingdom’s GDP (gross domestic product) growth slowed down to 6.9% in the third-quarter of the year, the slowest it has been since the first quarter of 2009. Furthermore, Singapore had narrowly avoided a technical recession in the third-quarter. Drawing from his observations, Loh noted that the combination of slower demand-growth and global oversupply continues to weigh on oil prices.
- Amidst the challenging backdrop, Keppel Corporation has acceded to delaying delivery of three jack-up rigs, two for Grupo R and one for Parden Holdings. Chow Yew Yuen, Chief Executive Officer for Keppel Oil and Marine, added that the delay was for three to four months. Speaking of delivery delays, Chow also gave new information related to Brazilian oil major, Sete Brasil. Keppel Corporation has not received any payments from Sete since November 2014. The current delivery status depends on Sete’s ability to refinance. Loh added later on that the Sete contracts are not part of Keppel Corporation’s account receivables but instead made up $4 billion of the firm’s $10 billion net orderbook.
- On the other hand, Keppel Corporation believes that exploration and production investments will eventually have to keep up with global oil demand, which is estimated to rise by 1.4 million barrels per day in 2016. Loh added that the company’s yards will still be busy for the next two years.
- Chow added that the Offshore and Marine segment is mindfully reducing its costs. Direct labor was reduced by 12% through natural attrition. Beyond reducing the cost structure, Chow stressed that it was important that cost reduction is done in a way which still allows Keppel Corporation to participate in any upturn in fortunes in the future. With that in mind, Keppel Corporation is cross-deploying its people to gain experience and exposure during this downturn.
- Moving on to the Property segment, Loh noted that the privatisation of Keppel Land has added $127 million in net profit contribution year to date. The interest cost related to the privatisation was $15 million, prompting Loh to add that the move is highly accretive. For the first nine months of the year, Keppel Land has sold 3,130 homes or 66% higher than the same period last year and is already more than the 2,400 homes in total that were sold in 2014.
- There may be more to look forward to in the Property segment. Ang Wee Gee, Chief Executive Officer for Keppel Land, mused that the conglomerate has a sizable land bank in China and is able to launch another 10,000 units over the next two years. Vietnam would be the other key market that Keppel Corporation has its eyes on.
- Meanwhile, Loh also stressed the importance of the Infrastructure division which is deemed to be a stable contributor to Keppel Corporation’s bottom line. Net profit for the division was $160 million for the first nine months of the year. The increase in contribution was mainly due to the injection of Keppel Merlimau Cogen into Keppel Infrastructure Trust.
- Elsewhere, Loh also gave an update on Keppel Corporation’s Investments unit. The conglomerate subscribed to the rights issue for KrisEnergy Holdings Ltd (SGX: SK3), increasing its stake to 40.2%.
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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 Chin Hui Leong doesn’t own shares in any companies mentioned.