3 Things that Investors Should Know About Keppel Corporation Limited Now

Keppel Corporation Limited (SGX: BN4) is a conglomerate in Singapore’s stock market.

It is one of the largest oil rig builders in the world with its offshore and marine business segment. It is also a property developer and investor and owns subsidiaries, such as Keppel Telecommunications & Transport Ltd (SGX: K11) and Keppel Infrastructure Trust (SGX: A7RU), that deal with infrastructure-related assets such as data centres, logistics warehouses, and power plants, just to name a few.  

There are three things about Keppel Corp that investors should know right now:

1. Sete Brasil has filed for bankruptcy protection

Sete Brasil is one of the main customers of both Keppel Corp and Sembcorp Marine Ltd (SGX: S51), another major oil-rig builder.

Last week, Sete Brasil filed for bankruptcy protection. The filing may have an impact on the order book and account receivables of Keppel Corp. The compay has stopped all construction of Sete Brasil projects since the end of 2015 and will not resume work unless payment is received. At this stage, it is still uncertain how much Keppel Corp can expect to recover from Sete Brasil.

2. Keppel Corp’s latest quarterly earnings

In the first-quarter of 2016, Keppel Corp’s revenue is down by 38.1% from S$2.8 billion a year ago to S$1.7 billion. Profit attributable to shareholders had followed suit with a decline of similar magnitude of 41.5%.

The main contributor towards the conglomerate’s sharp declines in revenue and earnings is the weakness seen in the offshore and marine segment.

Yet, there are positives from the recent earnings report. One is that the property business is performing well due to better performance in China. Revenue and profit attributable to shareholders in the segment had jumped by 66% and 63%, respectively, in the first-quarter of 2016.

3. Oil prices have climbed above US$40 per barrel

The decline in the price of oil from over US$100 per barrel in mid-2014 to a low of around US$30 earlier this year has brought about significant cuts in capital spending throughout the oil and gas industry globally. This has a direct hit on Keppel Corp’s offshore and marine engineering business.

But recently, the price of oil has climbed above US$40 per barrel. There’s still a long way to go before oil reaches its previous heights, but every little bit counts for the oil & gas industry right now.

Developments in the price of oil are important for Keppel Corp considering that its offshore and marine business had contributed to 48% of total revenue in the last reported quarter.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.