Latest Earnings From Keppel Telecommunications & Transportation Ltd: What Investors Should Know

Keppel Telecommunications & Transport Ltd (SGX: K11) had delivered its fiscal fourth-quarter earnings (for the quarter and year ended 31 December 2015) yesterday evening.

As a short introduction for context later, Keppel T&T is in the logistics as well as data centre business. The company also has an investment arm that counts a near one-fifth stake in local telco M1 Ltd (SGX: B2F) as its most significant investment.

Financial highlights

For the year, Keppel T&T saw a 10.7% dip in revenue to S$200.6 million largely due to the absence of revenue from the spin-off of two data centre properties into Keppel DC REIT (SGX: AJBU) in December 2014. Keppel T&T remains as the manager and sponsor of Keppel DC REIT.

On the surface, Keppel T&T’s bottom-line picture looks horrible: net profit attributable to shareholders had plunged by 62.9% from S$246.6 million to S$91.5 million. But, the large decline was mainly due to the one-off appearance of S$186.4 million in net profit attributable to shareholders as a result of the aforementioned data-centre-spin-offs.

If that one-off impact were adjusted for, Keppel T&T’s net profit attributable to shareholders in 2014 would have been just S$60.2 million; the S$91.5 million recorded in 2015 would thus represent growth of over 50%.

On the cash flow front, Keppel T&T didn’t do well. Net cash from operating activities had declined from S$70.9 million in 2014 to just S$25.7 million. Meanwhile, dividends received from associated companies had also fallen significantly from S$105.6 million to S$48.2 million over the same period.

Keppel T&T ended 2015 with a weakened balance sheet as compared to a year ago. To that point, a net-debt position of S$198.3 million at end-2014 (S$280.7 million in cash & fixed deposits vs. S$479 million in total debt) had become S$326.9 million as of 31 December 2015 (S$188.5 million in cash & fixed deposits vs. S$515.4 million).

The company had declared a final dividend of 3.5 cents per share for 2015. This represents a big drop from the dividend of 15 cents per share seen in 2014 which included a special dividend of 11.5 cents per share.

A future outlook

For the Logistics division, Keppel T&T commented that it had faced a “challenging year in Southeast Asia and China” in 2015. The company added that throughput for its port businesses are “expected to face downward pressure given the slowdown in import and export activities in the markets we operate in.”

But, there are still some positives happening in the division. The company’s Tianjin Eco-city distribution centre and Lu’an food logistics park are expected to be ready this year and “have made progress in building up customer pipelines.”

Things are looking brighter for the Data Centre division as it has completed a property acquisition in Singapore for the development of a new Tier III data centre. Meanwhile, in late 2015, Keppel DC REIT had also made its maiden acquisition in Germany for a data centre that will be developed. The acquisition is expected to be “immediately DPU [distribution per unit] accretive” and will help bump up the REIT’s assets under management to S$1.2 billion upon completion.

Furthermore, Keppel T&T reported that its development of a data centre in Tampines is making good headway and that it “will be ready to be injected into [Keppel DC REIT] in 2016.”

Based on its closing price of S$1.41 yesterday, Keppel T&T is valued at 8.5 times trailing earnings.

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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 James Yeo doesn’t own shares in any companies mentioned.