Keppel Corporation Maintains its S$0.33 Dividend for FY2022: 5 Highlights from the Conglomerate’s Latest Earnings

Deepwater Oil Rig
Deepwater Oil Rig

It was a rocky year in 2022, but Keppel Corporation Limited (SGX: BN4) managed to beat the odds to report a good set of earnings for its fiscal 2022 (FY2022).

The conglomerate has demonstrated resilience by more than doubling its recurring income while advancing its Vision 2030 strategic initiatives.

Last week, we reported on its associate, Keppel DC REIT (SGX: AJBU), and how its distribution per unit has continued to climb despite macroeconomic headwinds.

Let’s now take a closer look at Keppel Corporation’s FY2022 results to draw insights on what to expect from the blue-chip group moving forward.

Here are five highlights from its earnings that investors should find useful.

1. A creditable financial performance

For FY2022, revenue remained flat year on year at S$6.6 billion.

Energy and Environment and Asset Management divisions saw a 19% and 20% year on year climb in revenue, respectively, to S$4.2 billion and S$195 million.

However, Urban Development saw a 45% year on year decline in revenue to S$904 million as the division’s sales value plunged from S$4 billion in FY2021 to S$1.3 billion in FY2022.

Operating profit halved year on year to S$565.2 million due to the reduction in fair value gains from Keppel Corporation’s investment properties, investment securities, as well as disposal gains.

Net profit dipped by 9% year on year to S$926.7 million.

A final dividend of S$0.18 was declared, slightly lower than the S$0.21 paid out a year ago.

However, the FY2022 dividend came up to S$0.33, similar to the level paid in FY2021.

Shares of the conglomerate offer a trailing dividend yield of 4.5%.

Keppel Corporation generated a positive operating cash flow of S$181.3 million for FY2022.

Despite this, free cash flow came in at a negative S$515 million, an improvement from the negative free cash flow of S$966.6 million in the prior year.

The group’s return on equity (ROE) slipped from 9.1% in FY2021 to 8.1% in FY2022.

2. More than doubling its O&M order book

Keppel’s Offshore and Marine (O&M) sub-division, parked under its Energy and Environment division, saw its order book more than double year on year in FY2022 from S$5.1 billion to S$11 billion.

An impressive S$8.1 billion in new orders were snagged during the previous fiscal year.

These orders are slated for delivery between this year and 2025 onwards.

Meanwhile, Keppel’s O&M division is slated to be acquired by Sembcorp Marine Ltd (SGX: S51), with the latter holding its extraordinary general meeting on 16 February to ask its shareholders to approve the purchase.

Management has updated that the total realisable value from this transaction stands at S$9.6 billion, with Keppel’s shareholders slated to receive 19.6 Sembcorp Marine shares with an implied value of S$2.33 for every Keppel share held.

3. Pushing ahead with its asset-light strategy

Management continues to push on with its asset-light strategy, with more than S$4.6 billion of value unlocked since October 2020.

Keppel’s target is to hit S$5 billion in monetisation by the end of this year, but management has hinted that they will not stop at this number.

Of the S$4.6 billion, S$3.6 billion has been collected in cash.

These monetisations will create more room on Keppel’s balance sheet to take on new growth opportunities that will eventually allow the group to achieve its 15% ROE target by 2030.

4. Higher asset management fees and recurring income

Interestingly, asset management fees made up the lion’s share, or one-third, of Keppel’s net profit for FY2022.

These higher fees tie in with management’s pivot to go from an order book-based business to one focused on generating higher recurring income.

For FY2022, two-thirds of net profit came from recurring income sources, with the bulk coming from infrastructure services and REITs and trusts.

Meanwhile, asset management fees from Keppel Capital have also been steadily rising.

These fees have increased from S$180 million in FY2020 to S$267 million in FY2022, and the division has a target of growing its assets under management from the current S$50 billion to S$200 billion.

5. Bulking up on renewables and clean energy

Keppel Infrastructure (KI), a sub-division of Keppel’s Energy and Environment division, has been building up its renewables portfolio.

KI partnered with Swiss-based MET Group to pursue Western renewables opportunities and is also developing Singapore’s first hydrogen-ready power plant.

In the area of clean energy, KI is partnering with an Indian company, GreenKo, to jointly explore solar and wind energy projects.

Elsewhere, the sub-division has also signed agreements with Pertamina and Chevron Corporation (NYSE: CVX) to explore the development of green hydrogen and ammonia projects in Indonesia.

Want to know what to expect in the stock market in 2023? Which were the best performing stocks and blue chips in the Singapore market in 2022? Be prepared for 2023 with our special FREE report. Click HERE to download “Year in Review 2022”

Don’t forget to follow us on Facebook and Telegram for some of our latest free content!

Disclosure: Royston Yang owns shares of Keppel DC REIT.

The post <strong>Keppel Corporation Maintains its S$0.33 Dividend for FY2022: 5 Highlights from the Conglomerate’s Latest Earnings</strong> appeared first on The Smart Investor.