However, 1Q19 revenue grew 4.1% to $1.53 billion, underpinned by higher revenues from power and gas sales, infrastructure projects in Singapore and Hong Kong, asset management and the consolidation of M1.
See: Keppel Corp posts 40% drop in 1Q earnings to $203 mil on lower one-off gains
The way analyst Low Pei Han sees it, a long-awaited turnaround in Keppel Corp’s O&M division could be key to better time ahead for the group.
“Revenue from the offshore & marine division was at the same level as 1Q18, but the segment turned in net profit of $5.9 million compared to losses of $109.3 million and $22.8 million in 4Q18 and 1Q18,” says Low.
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“Since late 2014, the group has been right-sizing the segment, but looking ahead, there are plans to recruit about 1,800 full-time staff in 2019 – the first time in a number of years,” she adds.
As at end March, O&M’s direct headcount stood at around 10,800.
Excluding the Sete rigs, the O&M division’s net order book currently stands at $4.6 billion, according to Low.
However, she points out that the group’s net gearing has increased to 0.72 time as at end March 2019, compared to 0.48 time as at end FY18.
This is mainly due to higher working capital requirements, financing for the acquisition of M1, and as a result of the inclusion of lease liabilities due to the adoption of the new accounting standard on leases, Low says.
Looking ahead, she notes that the group has announced a mid- to long-term ROE target of 15% -- just below its average ROE of 17.7% from 2009-2018.
As at 1.18pm, shares in Keppel Corp are trading 2 cents higher at $6.92. This implies an estimated price-to-earnings (PE) ratio of 14.6 times and a dividend yield of 3.6% for FY19F.
