While the group registered $315 million in fair value gains in 2HFY2021, which is absent in the upcoming 1HFY2022, Lim believes that investors will likely be more focused on the group’s strategy post-completion of the Sembcorp Marine and Keppel O&M merger, which is expected to complete by the end of this year.
“We estimate Keppel to have monetised about $500 million of assets in 1H FY2022 with an accumulated asset monetisation of $3.5 billion since September 2020 ($5 billion target by 2023),” adds Lim.
Merger aside, the analyst expects the group’s infrastructure segment to continue being its key driver in 1HFY2022 buoyed by strong electricity and gas prices amid increasing energy prices in Singapore. “We forecast 1HFY2022 infrastructure revenue at about $2.5 billion, up 88% y-o-y (1QFY2022: $994 million) and net profit at around $116m on the back of stronger margin from higher average selling prices (ASPs),” she adds.
On the other hand, the group’s offshore & marine (O&M) segment will also likely see narrowing losses on a business as usual (BAU) basis, as the analyst expects more work to have carried out as labour issues gradually ease
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“We estimate O&M revenue [to] hit $1.3 billion in 1HFY2022 (+65% y-o-y, +6% h-o-h) with the potential of positive EBIT and breakeven at net profit level. Recall that in 1QFY2022, Keppel said the segment’s net loss declined significantly y-o-y with positive EBITDA (no details disclosed). Ex chartering contract, KEP O&M has secured about $330 million of new contracts ytd,” notes Lim.
Revaluation gains aside, Lim thinks that the lockdowns in China likely resulted in continued weakness in home sale/completion. Hence, she expects 1HFY2022 urban development revenue to be weaker at approximately $420 million (-54% y-o-y, -42% h-o-h) with $165 million net profit (-41% y-o-y, -66% h-o-h).
While China has tightened regulations for property developers to loan from banks, CGS-CIMB’s channel checks found that Keppel Land’s projects have not faced refusal mortgage repayment issues.
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With that, Lim expects asset management fee income to continue to grow as in 1QFY2022 (+70% y-o-y in fees to $71 million). She also forecasts $135 million in net profit from asset management in 1HFY2022 (+15% y-o-y, -27% h-o-h). Its connectivity segment likely saw 1HFY2022 net profit of $33 million (+21% y-o-y, -11% h-o-h) on the back of border reopenings.
As at 2.30pm, shares in Keppel Corp are trading 1.87% higher at $6.55.
