Why Keppel's offshore segment could be worse than expected

Gains from the segment may fall to as low as $3b.

Keppel's offshore and marine segment (O&M) was a big miss in the past quarter after reporting a mere profit of $95,000.

According to DBS Vickers Securities, this is due to the low activity level in the segment. Its earnings before interest and tax (EBIT) margins plunged to as low as 0.8%, compared to a margin of 18.8% a quarter ago.

"We forecast revenues from Keppel O&M falling to the around $3-4b levels in each of FY17 and FY18, from $7-8b p.a. during FY12-14. The continued depletion of its orderbook, and deferments/cancellations could pose downside risks to our forecast" the brokerage firm noted.

Here's more from DBS Vickers Securities:

In 4Q16, Keppel provided S$313m impairment for fixed assets, stocks & WIP and investments which largely arose from the O&M segment, partially offset by fair value gain on investment property. Stripping this out, PATMI would have been better than expected at c.S$300m (vs reported S$143m).

O&M segment reported a loss of S$138m due to provisions of S$270m in the quarter. Otherwise, it would have registered a stellar EBIT margin of 18.8% and PATMI of S$130m, aided by write-back, repair jobs and cost savings.

Order wins in 2016 was rather low at S$500m. We expect Keppel to secure S$1.5bn worth of new orders this year. Orderbook (excluding S$4b Sete rigs) has dwindled to S$3.7b, from S$5.1b as at end-2015 and S$4.1b a quarter ago.

The people you want to reach are already in this room.

Every quarter, SBR lands on the desks of the founders, CFOs, and directors running Asia's most consequential companies. Every day, they open our newsletter and read our website. It's a room that took twenty years to build — and it's the one most of our partners are trying to get into.

The good news is that the door is open. We work with companies on thought leadership articles, sponsored content, industry summits across Southeast Asia, regional awards programmes, podcasts, and media placements in print and digital. The shape of the right partnership depends on what you're trying to do, which is why we'd rather start with a conversation than send a rate card.

If you have something this room should know about, tell us. We'll tell you honestly whether we can help, and how.

No rate cards until we understand the brief. It's a better use of everyone's time.

Book a meeting

| Or download the media kit (PDF)

240,000 senior readers quarterly in print Top 1,700 Singapore companies reached

7 markets across Southeast Asia