Keppel T&T

Keppel T&T (S$1.41) 3Q15 results impacted by divestment but new assets coming on stream

Keppel T&T’s 3Q15 net profit tumbled 17.1% to $15.3m on a weaker revenue of $50.9m (-5.1%), largely due to divestment of two data centres to Keppel DC REIT in Dec '14.

Operating profit was more severely hit, plunging 34.5% to $7.4m, due to lower non-core investment and sundry income. As such, operating margin narrowed 6.6ppt to 14.6%.

Bottom line was further hit by higher taxes (+36.5% to $5m) during the quarter, but partially supported by a stronger set of results from associated companies and joint ventures (+9% to $17.7m).

Net gearing climbed to 0.38x from 0.25x in Dec ’14 as shareholders' equity shrank post payment of final and special dividend in May and increased capex for fit-outs of its data centres.

Looking ahead, management plans to focus on improving occupancy and operational efficiency of its logistics properties amid a challenging environment. Its warehouse at Tampines Logistic Park has commenced operations in 2Q15 and has achieved above 60% occupancy rate with commitments of over 70%.

Marketing efforts are also being ramped up for its new Tianjin Eco-city distribution centre and Lu'An logistics park in China to boost take-up rate as they commence operations within the next six months.

As for its data centres, the group intends to continue pursuing expansion opportunities amid rising demand for its facilities. In 3Q15, the group has commenced operations at its Almere Data Centre 2 in Netherlands and acquired a $20m industrial building at Tampines to redevelop into its fourth data centre in Singapore.

Keppel T&T is currently trading at 12.8x FY15e P/E and 1.2x P/B.