How Did Keppel Corporation Limited’s Property Business Fare In 2017?

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

In late January, Keppel Corp reported its 2017 full year earnings. Given that the company has a few businesses, I thought it would be useful to take a separate look at each of the components. In an earlier article, I had discussed the Offshore & Marine segment. In this article, my focus is on the Property business.  [Editor’s note: An article discussing the Infrastructure segment has been published. It can be found here.]

The financial performance

Here’s a table showing some key financial numbers for the Property business for 2017:

Source: Keppel Corp 2017 full year earnings presentation

We can see that the Property segment had a mixed year. Its revenue fell 12% to S$1.78 billion, due mainly to lower revenue from China and Singapore. But, its net profit grew 10% to S$685 million, driven by  higher fair value gains on investment properties, higher contributions from Singapore and Vietnam property trading activities, and en-bloc sales of development projects. These were partly offset by a lower share of profits from associated companies, and the absence of a reversal of an impairment for hospitality assets recorded in 2016.

What’s also useful to know is that the Property segment was the biggest profit contributor to Keppel Corp in 2017.

Useful business statistics

There are a few useful statistics on Keppel Corp’s property business that investors may want to know.

Firstly, the segment sold more than 5,480 homes in 2017, comprising 3,725 in China, 1,110 in Vietnam, 380 in Singapore, and 270 in Indonesia. This was 4.2% lower than in 2016, when 5,720 homes were sold.

Secondly, Keppel REIT’s (SGX: K71U) office buildings in Singapore and Australia maintained a high committed occupancy rate of 99.7% at the end of 2017.

Thirdly, in 2017 Keppel Land divested three projects, which have a total of 4,330 homes. This is significantly higher than the 630 homes divested in 2016.

Fourthly, the Property segment has a residential pipeline of 63,000 homes. Keppel Corp is also studying the redevelopment potential of Keppel Towers and Nassim Woods, which can potentially add another 500 homes to the company’s Singapore landbank of 1,200 homes.

Lastly, on the commercial front, Keppel Land has a GFA (gross floor area) of 1.5 million square metres that is either completed, or under development. When fully stabilised, this portfolio can generate an annual net operating income of about S$300 million. This can help grow the Property segment’s recurring income.

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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.