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Keppel Corporation 1QFY2023 revenue up 9% y-o-y, net profit 'significantly higher' with O&M disposal gain

Jovi Ho
Jovi Ho • 5 min read
Keppel Corporation 1QFY2023 revenue up 9% y-o-y, net profit 'significantly higher' with O&M disposal gain
Without revealing specific figures, the group says its 1QFY2023 net profit was “significantly higher” y-o-y with the disposal gain of some $3.3 billion from the merger of Keppel Offshore & Marine and Sembcorp Marine. Photo: Keppel Corporation
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Keppel Corporation has posted revenue of $2.25 billion for 1QFY2023 ended March, 9% higher y-o-y, as its Energy & Environment, Urban Development and Connectivity segments reported higher contributions.

Without revealing specific figures, the group says its 1QFY2023 net profit was “significantly higher” y-o-y with the disposal gain of some $3.3 billion from the merger of Keppel Offshore & Marine and Sembcorp Marine.

Keppel also received $500 million in cash, and distributed about $3.85 billion to its shareholders via a distribution in specie of Sembcorp Marine shares in 1Q2023.

“In addition, through the Asset Co transaction, the volatile earnings of the offshore and marine (O&M) business, which registered an average annual net loss of $178 million over the past five years, have also been replaced with stable interest income from the vendor notes of about $170 million per annum,” reads an April 20 press release. “Furthermore, Keppel will also benefit from a redemption premium equal to 5% of the outstanding principal amount if and when the vendor notes are redeemed.”

On the back of the “significant” disposal gain, the group’s net gearing increased slightly to 0.83x as at end-March, from 0.78x as at end-2022.

As at end-March, 69% of the group’s borrowings were on fixed rates, with average interest cost of 3.39% and weighted tenor of approximately three years.

See also: DBS reinstates coverage on Keppel Corporation, the 'undervalued gem'

In 1QFY2023, the group announced the further unlocking of $373 million in capital, bringing the cumulative asset monetisation to more than $4.9 billion since the asset monetisation programme began in October 2020.

Asset management

On the group’s asset management segment, Keppel Capital’s 1QFY2023 performance was lower y-o-y mainly due to absence of fees from acquisitions made by Keppel Infrastructure Trust and Keppel DC REIT in 1QFY2022.

See also: Singapore, Indonesia sign MOU to develop renewable energy for domestic use and export

Keppel Capital has an assets under management (AUM) target of $200 billion by 2030, up from $50 billion currently.

The Keppel Sustainable Urban Renewal Fund touts an asset rejuvenation strategy that seeks to decarbonise buildings and create sustainable, future-proofed commercial real estate; and has a target size of US$2 billion.

The Keppel Core Infrastructure Fund, whose core strategy focuses on operating assets with a proven track record and resilient performance across economic cycles, has a target size of US$2.5 billion.

“Keppel Capital continues to garner investor interest for the Keppel Sustainable Urban Renewal Fund and Keppel Core Infrastructure Fund launched in late-2022, and is looking to launch the Keppel Asia Infrastructure Fund II, following the successful deployment of Fund I and its co-investment vehicles,” says the group.

Energy and environmental infrastructure and services

Keppel Infrastructure's 1QFY2023 revenue was up 3% y-o-y to $1.03 billion, driven by higher sales from the Power & Renewables and Energy-as-a-Service (EaaS) businesses. Net profit for the quarter “improved strongly y-o-y”, says Keppel.

Keppel Infrastructure has secured more than $320 million EaaS subscriptions since its launch of in late 2021, with recurring subscriptions across energy supply, cooling services, energy optimisation and analytics and electric vehicle charging.

See also: Sabana REIT partners Keppel EaaS to build EV charging, solar panels in its properties

On low-carbon energy, Keppel Infrastructure has reached the financial close for the Keppel Sakra Cogen Plant, with expected groundbreaking by mid-2023. Keppel Infrastructure is also developing green hydrogen and ammonia value chains with international partners.

On renewable energy, Keppel Infrastructure Renewables (KI Renewables) grew total generation capacity by 9% during the quarter from 2.6 gigawatts (GW) at end-2022. 65% of the total capacity is operational while 35% is under development

Keppel’s renewable energy portfolio earned $35 million in profit in FY2022, with the Lao PDR-Thailand-Malaysia-Singapore Power Integration Project (LTMSPIP) contributing since June 2022.

During the quarter, Keppel received conditional approval from the Energy Market Authority (EMA) for the import and sale of 1GW of low carbon electricity from 4GW of renewable energy sources in Cambodia, and potentially Lao PDR.

Keppel also signed a memorandum of understanding (MOU) as part of a Sustainable Energy Association of Singapore (SEAS) consortium to develop Indonesia’s Green Corridor Project for domestic use and export to Singapore.

Urban development

Keppel Land’s 1QFY2023 net profit was higher y-o-y with more contributions from trading projects.

During the quarter, Keppel Land announced the unlocking of about $280 million in capital from assets in the Philippines, Myanmar and Vietnam.

Connectivity

Keppel Data Centres reported a y-o-y decline in 1QFY2023 performance mainly due to costs incurred to support new projects and its expansion in new markets.

Meanwhile, telco M1 recorded a significantly higher y-o-y net profit in 1QFY2023, while its revenue rose 14% y-o-y to S$295 million. The enterprise business topline grew 60% y-o-y to $107 million, and made up about 36% of M1’s total revenue in 1QFY2023, compared to 26% in 1QFY2022.

Loh Chin Hua, CEO of Keppel Corporation, says: “Keppel continues to deliver strong value for shareholders as we execute our Vision 2030 plans. Including the completion of the O&M transactions and the distribution in specie of Sembcorp Marine shares, Keppel has delivered a total shareholder return of 77.7%, more than eight times Straits Times Index’s 9.2%, over a 15-month period from the start of 2022 to end-March 2023."

He adds: “We have achieved our three-year asset monetisation target ahead of schedule, with over $4.9 billion announced since October 2020. We expect to exceed the upper bound of the $3 billion to $5 billion range by year-end, and will announce a new interim monetisation target shortly, with the final goal of reaching the full $17.5 billion announced earlier."

Loh says his team will share more details on the next phase of Keppel's transformation plans in May.

Shares in Keppel Corporation closed 8 cents higher, or 1.29% up, at $6.27 on April 20.

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