Latest Earnings From Keppel Telecommunications & Transportation Ltd: One-Off Gains Boost Profit

Keppel Telecommunications & Transportation Ltd (SGX: K11) had delivered its third-quarter 2016 earnings yesterday evening.

As a quick background, Keppel T&T has three business divisions: Logistics, Data centers, and Investments. Part of Keppel T&T’s data centre-related business includes a stake in and management of Keppel DC REIT (SGX: AJBU). As for the Investments division, one of its investments would be a 19% stake in Singapore’s smallest telco M1 Ltd  (SGX: B2F).

With that, let’s have a look at Keppel T&T’s results to see how it fared:

Financial highlights

  • For the reporting quarter, Keppel T&T saw an 8.7% drop in revenue to S$46.5 million from S$50.9 million a year ago. The big culprit here is the logistics business, which recorded lower revenue. Growth from the data centres business had helped to offset some of the decline.
  • But, Keppel T&T’s net profit attributable to shareholders soared 356.5% to S$69.9 million. This also resulted in a huge 346.4% increase in the company’s earnings per share to S$0.125. Keppel T&T recorded a gain on the sale of a subsidiary and adjustment to gains from the two data centres sold on December 2014.
  • On the cash flow front, operating cash flow came in at S$11.4 million, up from S$1.8 million in the same quarter a year ago. Capital expenditure also saw a jump from S$5 million to S$11.5 million. These numbers meant that free cash flow for the reporting quarter is a negative S$0.1 million, an improvement from the negative S$3.2 million seen a year ago.
  • Moving on to Keppel T&T’s balance sheet, as of 30 June 2016, total debt stands at S$476.6 million while cash and cash equivalents stood at S$170.9 million. This implies a net debt of S$305.7 million, which is an increase from the S$290.8 million (cash & equivalents of S$227.3 million and total debt of S$515.3 million) seen in the third-quarter of 2015.
  • The company’s net asset value also increased by 17.5% from S$1.20 in the third-quarter of 2015 to S$1.41 in the reporting quarter.

A future outlook

In the earnings release, Keppel T&T provided some insight on its future outlook. For the Logistics division, the company commented that “with few signs of recovery in trade and manufacturing across Asia, the operating environment for logistics remained challenging.”

Keppel T&T went on to provide some updates on the important developments within the division. It said:

“The Logistics Division has increased efforts to win new customers and streamlined its operations to improve operating efficiencies. In early September, Tianjin Ecocity Distribution Centre commenced operations in integrated cold chain logistics services, targeting customers in food processing and trading business.

Going forward, the Division is looking at expanding its capabilities to provide more value-added services to customers, tapping on the key growth trends in Asia Pacific.

In line with this, the Logistics Division is acquiring a majority stake in Courex Pte. Ltd., a Singapore-based third-party logistics company that provides last-mile delivery services using a crowdsourcing model that taps into a large network of independent delivery personnel. This acquisition will strengthen the Division’s delivery of urban logistics solutions to capitalise on the strong growth in the e-commerce sector.“

So as you can see, the Logistics segment wants to take advantage of eCommerce opportunities and has been making acquisitions to that effect. Regarding the Data Centre division, Keppel T&T said that its data centres “continue to enjoy good occupancy.” It added:

“The strategic collaboration with Quann, a homegrown Managed Security Services Provider and a business unit of Certis CISCO, has enabled the Division to offer cyber security solutions to its customers. Keppel DC Singapore 4’s* (T20) construction is underway for a targeted completion in

The Division continues to seek growth opportunities in its targeted markets, tapping on the existing Development Company and REIT capital recycling platform, as well as the newly formed Alpha Data Centre Fund.”

Shares of Keppel T&T closed at S$1.80 each yesterday, giving the company a price-to-book ratio of 1.28.

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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 Esjay does not own shares in any company mentioned.