Keppel(KPELY) - 2022 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Keppel Corporation achieved a net profit of SGD 498 million in the first half of 2022, a 66% increase from SGD 300 million in the same period of 2021 [7] - Annualized return on equity improved to 8.4% for the first half of 2022, compared to 5.5% for the first half of 2021 [32] - Free cash outflow was SGD 127 million in the first half of 2022, compared to an inflow of SGD 499 million in the first half of 2021 [8] - Net gearing remained stable at 0.68x as of end-June 2022, unchanged from end-December 2021 [8] Business Line Data and Key Metrics Changes - Urban Development and Asset Management contributed 65% of the Group's profits, while Energy & Environment contributed SGD 45 million, reversing a net loss from the prior year [34] - Asset Management's net profit increased by 32% to SGD 155 million, driven by higher fee income and fair value gains [47] - M1's net profit grew 62% to SGD 34 million, supported by strong enterprise business growth and increased roaming revenues [23] - Keppel Infrastructure's earnings rose 77% year-on-year to SGD 106 million, reflecting strong execution of ongoing projects [40] Market Data and Key Metrics Changes - The property market in China faced significant challenges, with Keppel Land experiencing a 50% drop in units sold, from 1,550 units in the first half of 2021 to 480 units in the first half of 2022 [54] - Despite short-term challenges, management remains optimistic about the long-term potential in key Tier 1 and 2 cities in China [19] Company Strategy and Development Direction - Keppel is focusing on sustainable urbanization solutions as part of its Vision 2030 strategy, emphasizing asset management and engineering capabilities in Energy & Environment, Urban Development, and Connectivity [6] - The company is actively monetizing its assets, with a target of exceeding SGD 5 billion by the end of 2023 [12] - Keppel is leveraging its asset-light model to invest in renewables and decarbonization solutions, with a recent investment of SGD 234 million in onshore wind assets [15] Management Comments on Operating Environment and Future Outlook - The global economic outlook has weakened due to geopolitical tensions, inflation, and supply chain disruptions, impacting growth prospects [3] - Management expressed confidence in the Group's ability to navigate challenges and enhance earnings through strategic execution [6] - The energy transition and climate action are expected to drive demand for sustainable energy infrastructure, positioning Keppel favorably in the market [29] Other Important Information - The Board approved an interim cash dividend of SGD 15.0 per share for the first half of 2022, higher than last year's interim dividend of SGD 12.0 [9] - Keppel has completed the divestment of Keppel Logistics and is in the process of combining Keppel O&M with Sembcorp Marine [6] Q&A Session Summary Question: Timeline for potential SGD 200 billion AUM - Management indicated no specific timeline but believes it is achievable based on asset-light model and monetization plans [50] Question: Insights into China projects and sales drop - Management reported a 50% drop in units sold in China but noted strong secondary market pricing in key cities [54] Question: Foresee any impairments in 2022? - Management reviewed projects and concluded no need for impairments, citing low risk for the land bank [56][58] Question: Update on data center development plans - Management is exploring innovative solutions for data centers, including a floating data center module [59] Question: Update on proposed O&M transactions - Management reported good progress on antitrust applications and integration planning, expecting completion in Q4 2022 [64] Question: New property project launches expected? - Management confirmed new launches in China and Vietnam, with approvals secured for several projects [74]