The Positives
+ Integrated power business doubled operating income and margins, benefitted from improved energy spark spread and exit from low-margined legacy contracts. 90% of its capacity is contracted for >1 year, providing visible and sustainable earnings. KIT contributed higher fees after a change in fee structure.
+ M1 grew revenue by 6%, after the acquisition of a Malaysian ICT in late 2022. Key drivers were higher enterprise customer sales (+27%) and total customers (+2%), and recovery of roaming services to 80% of pre-COVID.
The Negatives
– Real estate division was impacted by higher interest expense, lower fair value gains on investment properties and higher overheads at asset management units. The distribution of K Reit units to Keppel shareholders led to a S$111mn loss as the book value exceeded the market value.
– Recurring fee income from fund management fell 5.5% to S$86mn. About S$5bn new funds was raised in FY23. Investors’ appetite was muted amidst rising interest rates and tighter credit conditions. But the pace could pick up in FY24, as recently-acquired Aermont Capital extends its investor reach, and the interest rate environment turns favourable.
– Net gearing rose to 0.9x. Management has an internal net gearing threshold of 1x. Free cash flow was negative S$228mn. Net debt as at end Dec was S$9.7bn, at an average interest cost of 3.75%. Interest expense doubled to S$328mn.
Source: Phillip Capital Research - 5 Feb 2024
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Created by traderhub8 | Jun 03, 2024