Keppel T&T

Keppel T&T: (S$1.41) 4Q15 results masked by one-offs as China logistics slip
Keppel T&T’s 4Q15 net profit dived 77.6% y/y to $44.5m mainly due to the absence of divestment gains of $186.4m booked in 4Q14. Excluding those gains, net profit would have surged 3.7x mainly on fair value gains.

Revenue declined 25.8% to $52.6m following the divestment of two data centres to Keppel DC REIT as well as absence of management fees arising from Keppel DC REIT's IPO in Dec '14.

Operating profit tumbled 85.7% to $35.8m. However, stripping the divestment effects, the absolute figure would have shown a 2.9x jump, mainly boosted by fair value gains of $32.1m (4Q14: nil) but was partially pared by impairment losses of $9m (4Q14: $0.2m) and goodwill writeoffs of $1.5m (4Q14: nil) on its Vietnamese operations.

Core operating margin slipped 0.4ppt to 26.4% due to start-up costs of new logistics projects in China namely, the Tianjin Eco-city distribution centre and the Lu’an food logistics park which are expected to commence operations this year.

Overall, bottomline was buttressed mainly by contributions from its 30%-owned associate, Keppel DC REIT which had earlier reported a more than tripling in 4Q15 net profit to $54.8m, which included $41.9m fair value gain on investment properties.

Net gearing climbed to 0.4x from 0.25x in Dec ‘15 as it drew down on existing loan facilities for capex.

Moving forward, management plans to focus on driving sales and managing costs of its logistics properties amidst a challenging operating environment. It notes that it has made progress in its new warehouse in Vietnam which is seeing near-full occupancy levels, while its Tampines Logistics Hub has seen better occupancy rates.

As for its data centre division, it continues to seek new data centre development and acquisition opportunities with its Tampines data centre progressing well on healthy demand. It expects to inject that data centre into Keppel DC REIT this year.

At current prices, Keppel T&T is trading at 8.6x FY15 P/E and 1.08x P/B with a 2.5% yield based on a maintained final DPS of 3.5¢ but no special dividend (FY14: 11.5¢).

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