Keppel Telecommunications & Transportation Ltd (SGX: K11), or Keppel T&T in short, is a subsidiary of one of Singapore’s largest conglomerates, Keppel Corporation Limited (SGX: BN4). The thing about Keppel T&T is that its business itself is comprised of multiple parts. As such, it may be useful for investors to have an understanding of the company’s sources of income. Here’s a chart of Keppel T&T’s net profit in 2014 and 2015: Source: 2015 annual report We can see that Keppel T&T has three business segments, namely, Logistics, Data Centre, and Investments. In 2015, the Data Centre segment was by far…
The thing about Keppel T&T is that its business itself is comprised of multiple parts. As such, it may be useful for investors to have an understanding of the company’s sources of income. Here’s a chart of Keppel T&T’s net profit in 2014 and 2015:
Source: 2015 annual report
We can see that Keppel T&T has three business segments, namely, Logistics, Data Centre, and Investments.
In 2015, the Data Centre segment was by far the largest segment for Keppel T&T, accounting for close to 70% of the company’s net profit. Under this segment, Keppel T&T provides data centre facilities services, such as co-location, business continuity, disaster recovery, and facility management.
Keppel T&T also owns 30% of Keppel DC REIT (SGX: AJBU) and manages the REIT. The company houses this ownership stake under the Data Centre segment. Keppel DC REIT owns data centres in Australia, Asia, and Europe.
To put it simply, Keppel T&T’s Data Centre business segment generates its income from managing data centres, managing Keppel DC REIT, and sharing in 30% of the profit made by Keppel DC REIT.
The next largest profit contributor for Keppel T&T in 2015 is the Investments business segment. This segment’s income is driven mainly by Keppel T&T’s share of profit from the various investments it has made in other companies.
One of the most important components of the Investments segment is Keppel T&T’s 19% ownership stake in Singapore’s smallest telecommunications company, M1 Ltd (SGX: B2F). In 2015, M1 contributed S$34 million in profit to the segment.
We now come to the Logistics segment. Although it accounted for more than three-quarters of Keppel T&T’s total revenue in 2015, it contributed less than 10% of underlying net profit.
This segment’s income comes from activities such as integrated logistics port operations, third-party logistics services, supply chain solutions, warehousing, distribution, container storage and repairs, and freight forwarding services. Its operations are found mainly in Singapore, China, Malaysia, and Vietnam.
A Foolish takeaway
From all that we’ve seen above, we can conclude that Keppel T&T is essentially a data centre and telecommunications business, given the minor contribution to the company’s bottom-line from the logistics business.
And since a huge chunk of Keppel T&T’s profit comes from its ownership stakes in other entities such as M1 and Keppel DC REIT, it also makes sense to categorise Keppel T&T as an investment holding company rather than an operating company.
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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.