The impairment has hit Keppel Corp’s shareholders equity, causing NAV to fall 5.6% as at June 30, 2020, from Sept 30, 2019. As a result gearing has risen to 1x, from 0.85x as at end-2019.
Included in the $930 million of impairments was $228 million from Keppel Corp’s share of Floatel’s vessels, $10 million from its investment in Floatel, $18 million from KrisEnergy, and $421 million from contract assets (rigs, drillships etc) because customers were not able to take delivery.
In a sombre results briefing, Keppel Corp group CEO Loh Chin Hua looked forward to better times: “We have mentioned in Vision 2030 various steps we’re going to take in order achieve this [vision]. One of the steps is to actively turn our property landbank. The group has a considerable sized landbank in China and Vietnnam; we can build up to 45,000 units. We’ve been looking closely at how to activate this landbank, through development, joint-ventures and outright sales. We’ve been getting some of these assets derisked and ready, and [some] might be suitable candidates to monetise through various REITs and trusts we have.” Loh adds that he is looking at an ROE of 15% in the next three to five years and believes this is achievable through Vision 2030.
Keppel Corp announced an interim dividend of 3 cents, despite its loss as impairments are non-cash items. “This is something the board debated at length. We see losses in 1H2020 are primarily driven by huge impairment in Keppel O&M but if you exclude that, the group has improved on its performance in terms of net profit in 1H2020 and our cash outflow is smaller. We decided to pay a very small interim dividend. Last year it was 8 cents per share, and this year it’s smaller and something we can still afford,” Loh says.
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Keppel Corp's share price closed at $5.40 on July 30, down more than 20% year-to-date. Temasek's preconditional partial offer was at $7.35.
