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Keppel Corp

Decluttering

Company Profile

The company was founded in 1968 by Temasek Holdings, starting life as a shipyard. It was listed in SGX in October 1980. The conglomerate global businesses includes:

  • Offshore and Marine

  • Property

  • Infrastructure and 

  • Investments

In 2018, Singapore constitute 73% of revenue, followed by China 12%, Brazil/Americas 4%, Far East & ASEAN 6%. 

Financial Performance

Revenue had been trending down since 2014 but appeared to have bottomed in 2018; resulting in lower gross margin. The sharp uptick in net margin was because of divestments. 

Business Segment

Offshore & Marine was the company largest revenue contributor until 2017 where collapsing oil prices and issue with Sete Brasil led to losses.

In 2017, Infrastructure surpassed O&M and remained the firm's largest business contributing 44% of revenue in 2018. 

Since 2016, Property was the company major earning contributor. Divestment between 2017 & 2018 were key reason for the strong earnings in these two years. 

Investment portfolio play an important role in 2019 boosting overall revenue with the acquisition of M1 and land sale by Sino-Singapore Tianjin Eco-City. 

Temasek

In October 2019, Temasek offer to bid for a controlling stake in the company, increasing her share from 20.45% to 51% @ $7.35 per share. Intention is to 'undertake a comprehensive strategic review of its businesses.'

Opinion

In the current difficult operating environment, it is understandable that management focus primarily on both top and bottom lines. Despite O&M showing sign of recovery, the industry is under-going fundamental changes. Offshore was an important business to meet global oil demand in the past. However, with the growth in shale, LNG, and renewable energy coupled with aging population in developed countries and slowing global economies; demand characteristics may be changing. 

Meanwhile, Property divestment to boost earning have its limit. 

Keppel Corp in 2018, oversees about 260 subsidiaries and associates. Keppel Land alone constitute a little more than half. This number remain relatively constant compared to 2012 when the revenue was double. Given the diversity and complexity of Keppel Corp businesses, it make sense that Temasek take the lead in decluttering, and reorganising the firm into more effective units, and with the ability to control and respond to the various industries forces with a renewed sense of urgency.