Understanding The Profitability Of Keppel Corporation Limited’s Different Businesses

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

In a recent article, I wrote about the contributions to the company that each segment has made in 2015. I thought it’d be interesting to follow up by taking a look at the profitability of each business segment.

The profitability of each segment

More specifically, I want to understand how well each segment is doing when it comes to making a profit on each dollar of Keppel Corp’s equity that they employ. In other words, I want to calculate the return on equity for each segment (the return on equity is found by dividing each segment’s profit with its net assets, or equity).

So, here are the important numbers I need from the company’s 2015 annual report:

Source: Keppel Corp 2015 annual report

Using the numbers above, here are each segment’s return on equity:

Source: Keppel Corp 2015 annual report

We can see that the most profitable use of capital for Keppel Corp in 2015 is seen in its Investments segment – it had the highest return on equity. This segment mainly involves Keppel Corp’s external investments in other listed companies such as M1 Ltd (SGX: B2F).

The Offshore & Marine segment, despite the headwinds faced by the global oil & gas industry in 2015 (the headwinds are still ongoing), managed to deliver a 38% return on equity and is the next in line in terms of profitability for Keppel Corp.

If the Property segment continues to grow, we can expect the overall return on equity for Keppel Corp to decline since the segment has the lowest return on equity in 2015 at just 8%.

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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.