Tireless in Singapore
05/20/2009 11:46 am EST
Although based in a city-state, the energy, engineering, property, and telecom group Keppel has its fingers in many fast-growing pies further afield, reports Yiannis Mostrous in The Silk Road Investor.
Singapore-based conglomerate Keppel Corp (OTC: KPELY) is a world leader in rig construction and enjoys a dominant market share in jack-up building. It also has an extensive stable of investments; the more significant properties include Singapore Petroleum Company, MobileOne (mobile communications), and K1 Ventures (investments). It also has a 52% stake in Keppel Land, which is listed on the Singapore exchange.
Keppel's first-quarter revenue declined 20% on a quarter-over-quarter basis but was up 35% year over year. The Property division delivered somewhat disappointing results, but Offshore & Marine and Infrastructure offset that weakness.
Offshore & Marine (O&M) margins remained solid at 10.4%. Revenue was up 51% from year-ago levels, though there was a quarter-over-quarter decline. Pricing pressures in rig building remain the main problem for the O&M division. Infrastructure, although still a relatively small division, saw its income rise.
Keppel has successfully expanded its business in developing townships, where both its Property and Infrastructure divisions are kept busy. Its involvement in the Tianjin Eco-City project in China has raised the company’s profile in the area.
Keppel recently secured an engineering, procurement, and construction (EPC) contract worth US $340 million to build an energy-from-waste combined heat and power plant to serve the Greater Manchester region in the UK. Upon completion, which is expected in 2012, the project will be one of the largest waste and renewable energy projects in the UK.
Keppel will provide the technology and build the plant, which will have a capacity to use up to 420,000 tons per year of solid fuel derived from household waste, and will be able to supply at full capacity some 270,000 megawatts (MW) of electricity and 500,000 tons of steam per year. The project adds to Keppel’s growing presence in environmental engineering. It's currently working on similar plants in Sweden and Vietnam. The company estimates that its Environmental Engineering division will contribute 5% to group profits by 2010. Keppel is also positioning itself to reap big profits from the construction of efficient cities and the trend for more “green” alternatives in the industrial world.
Given Keppel’s business interests, a significant pickup in demand will be the main catalyst for the stock. At the same time, its diversified business model is a positive in current market circumstances.
Keppel is a great buy during times of weakness. Although the stock has run strongly this year, [it has further to go].