MENU

The 4 Ways Keppel Corporation Limited Makes Its Money

Keppel Corporation Limited (SGX: BN4) is a conglomerate with four major business segments, namely, Offshore & Marine, Property, Infrastructure, and Investments.

Since the start of 2014, Keppel Corp’s stock price has declined significantly by over 50%. In the past six months alone, the company’s shares have lost nearly 13% in value. What has happened?

We can perhaps glean some clues from the way the company makes its money. So, let’s take a closer look.

Historical revenue and profit

keppel-corp-total-reveneu-and-profit-from-2011-to-2015-lawrence
Source: Keppel Corp 2015 annual report

The table above is a summary of the total revenue and net profit for Keppel Corp in its last five fiscal years. We can see that the company’s revenue in 2015 is nearly the same level as in 2011. Meanwhile, profit is down by 22%.

A breakdown of revenue and profit

The following chart illustrates the revenue and profit contributions that each of Keppel Corp’s four segments have delivered from 2011 to 2015:

keppel-corp-business-segment-revenue-and-profit-from-2011-to-2015-lawrence
Source: Keppel Corp 2015 annual report

In 2015, Offshore & Marine was still the largest segment by revenue – it accounted for 61% of Keppel Corp’s top-line.

In Offshore & Marine, the company’s main business activities include the design, construction, repair, and upgrading of offshore rigs, the conversion and repair of ships, and specialised shipbuilding. This segment has a presence in countries such as Brazil, China, Singapore, the US, and more.

Infrastructure is the next largest revenue segment at 20%. In here, Keppel Corp’s business is in environmental engineering, power generation, logistics, and data centres. China, Qatar, and Singapore are some of the countries that the segment is active in.

Property is third in line in terms of revenue contribution at 19%. The segment’s business should be rather straightforward given its name – in here, Keppel Corp develops and invests in real estate, and runs real estate funds.

The smallest segment by revenue is Investments and this houses Keppel Corp’s stakes in other listed companies. Some of the segment’s main investments include KrisEnergy Holdings Ltd (SGX: SK3) and M1 Ltd (SGX: B2F).

Foolish takeaway

It’s clear that there are many moving parts to Keppel Corp’s business given what we’ve seen above. Here are some general observations.

First given the size of Keppel Corp’s offshore and marine segment, it is understandable that its share price has reacted negatively since the start of 2014. Oil prices are currently bouncing around US$40 and US$50 per barrel, which is a far cry from the level of more than US$100 seen in the middle of 2014.

Due to the fall in oil prices, many of the industry’s players – Keppel Corp included – are facing tough challenges in their business. The Offshore and Marine segment has seen its profit fall more than half from 2014 to 2015.

Second, the Infrastructure segment’s profitability is rising. If that continues, it could be help pick up some of the slack if further weakness is experienced in the oil and gas business.

Last, given the downturn faced in the Offshore & Marine segment, Keppel Corp’s biggest profit contributor in 2015 became Property. Developments in the real estate market in Asia (in particular, China and Singapore, the Property segment’s key markets) are now even more important for Keppel Corp.

If you like what you've seen, you can get even more investing insights and analyses from The Motley Fool's weekly investing newsletter Take Stock Singapore. It's FREE, so do check it out here.

Also, like us on Facebook to follow our latest news and articles. The Motley Fool's purpose is to help the world invest, better.

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.