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Keppel Corporation Limited’s (SGX: BN4) Latest Earnings Report: Lower Sales And Profits

Singapore-based conglomerate Keppel Corporation Limited (SGX: BN4) reported lower sales and profits for its latest quarter, but there could be some positive signs for investors. The group released its 2018 third-quarter earnings report yesterday.

Financial Highlights

Keppel Corporation has wide-ranging business interests including property, offshore and marine (O&M), infrastructure and investments. Let’s have a look at its financial figures to have a better understanding of how the company has performed:

1. For its reporting quarter, revenue declined 20% from S$1.62 billion to S$1.30 billion, as seen from the table below. For the first nine-months, Keppel Corporation’s revenue came in at S$4.29 billion which was down 3% compared to the same period last year when revenue was S$4.42 billion.

Source: Keppel Corporation Presentation Slides, in millions S$

2. Moving on, net profit for its reporting quarter came in at S$226 million which was 15% lower year-on-year. For the first nine months of 2018, Keppel’s net profit rose 18% to S$688 million, up from the S$809 million recorded in the first nine months of 2017.

3. The drop in net profit led to a 15% drop in earnings per share (EPS) to 12.4 cents for the reporting quarter. For the first nine months of 2018, EPS increased 18% to 44.6 cents in line with its increase in profit.

4. Keppel Corporation’s free cash flow over the first nine months of the year was S$828 million, down 20% compared to than the previous year’s first nine months when free cash flow came in at S$1.04 billion. The conglomerate’s free cash flow was boosted by S$969 million in divestments and dividend income.

5. The conglomerate’s net debt stood at S$4.84 billion as of 30 September 20187, down from the net debt of S$5.52 billion recorded on 31 December 20178. The decrease in debt resulted in its net gearing reducing from 0.46 at the end of last year to 0.41 at the end of the latest quarter.

6. Lastly, net asset value (NAV) per share remained relatively at S$6.30.

Business Highlights

The O&M segment reported a net profit of S$2 million for the reporting quarter, compared to zero profits made in the same quarter last year. For the nine-month months of the year, the segment still suffered a loss of S$38 million. The negative figures were due to lower work volume and losses at its associates. On a positive note, Keppel Corporation’s order-book has grown from S$3.9 billion at the end of last year to S$4.4 billion as of 31 September 2018.

The property division, one of Keppel Corporation’s key profit contributors had a reasonable performance for the quarter. The segment’s revenue saw a big decline for 2018’s third-quarter due to lower contribution from Singapore, China and Vietnam. The division, however, saw a net profit of S$161 million which was only 6% lower compared to a year ago.  Looking at the first nine months of the year, the property division profits has risen a 110% year-on-year. The segment’s profits were lifted by sales of development projects, fair value gains and divestment gains. Keppel Corporation has also sold a total of 3,180 units with a total sales value of S$1.4 billion in for the first nine months of the year.

Moving on, the infrastructure division had a steady performance boosted by environmental infrastructure and infrastructure services. Keppel reported that its new infrastructure projects in Singapore and Hongkong were progressing well. Elsewhere, Keppel also won a €70 million project in Australia for the supply of technology solutions.

Finally, the investment segment was impacted by losses at the group’s associate companies. Keppel Corporation’s asset management business, on the other hand, reported stable results.

Future Prospects

Looking into the future, Keppel has made some strategic investments into new markets and asset classes such as senior living, early education and Australian retail real estate.

Keppel has also announced a pre-conditional voluntary general offer, together with Singapore Press Holdings Limited (SGX: T39), to take majority control of M1 Ltd (SGX: B2F) to transform its business, thus allowing it to compete more effectively.

On these strategic investments, CEO of Keppel, Mr Loh Chin Hua commented:

“These are strategic initiatives, would further expand and enhance the Group’s earnings while positioning Keppel for long-term growth.”

At the time of writing, Keppel Corporation’s share price was S$6.74; which translates to a price to book ratio of 1.07, and a dividend yield of 3.55%.

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The Motley Fool Singapore contributor Esjay contributed to this article. Esjay does not own any of the shares mentioned.

The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. Motley Fool Singapore writer Chin Hui Leong does not own any of the shares mentioned.