Multi-sector strategy to help Keppel ride out crisis

Keppel Corp's flexibility in allocating capital and resources across business units and investments will keep enabling it to seize opportunities, says its chief executive Loh Chin Hwa.
Keppel Corp's flexibility in allocating capital and resources across business units and investments will keep enabling it to seize opportunities, says its chief executive Loh Chin Hwa.ST FILE PHOTO

Group's diverse interests will help it weather ups and downs in business cycle, says CEO

Keppel Corp chief executive Loh Chin Hwa believes the group's multi-sector strategy will allow it to weather ups and downs in the business cycle.

"Conglomerates tend to perform the best through crises because of their access to capital, and their ability to invest when times are tough," he said in an article in the group's monthly in-house newsletter.

"Of course, we want our engines firing on all cylinders. But even when we go through turbulence, and one of the engines slows down, the other engines would be able to pick up the pace," he added.

Mr Loh was referring to the group's core business in the offshore and marine sector, which has come under strain after oil prices slumped. Its other businesses include infrastructure and property, as well as other investments such as upstream oil and gas company KrisEnergy, and telco M1.

The group's stock has been under pressure as well. It slipped 0.15 per cent to $6.75 yesterday, reverting to levels last seen in the second half of 2011.

Mr Loh said the company's results this year "would have been worse" if it were a pure-play or single business company.

KepCorp logged a 1.6 per cent increase in net profit to $756.9 million for the six months to June 30, shored up by positive contributions from its property, infrastructure and investments segments - even as earnings at its offshore and marine division slumped 25 per cent.

Mr Loh said the company's flexibility in allocating capital and resources across business units and investments will keep enabling it to grab opportunities while capitalising on the synergies across its various divisions. Keppel Offshore & Marine (O&M), for instance, can assign projects to its subsidiaries to cope with its workload.

Said Mr Loh: "Even though orders for jack-ups have dried up for now, Keppel Singmarine is seeing good demand for non-drilling assets such as sub-sea and pipelay vessels. As some of these assets are quite large, Keppel Singmarine can now tap Keppel Fels' facilities and capabilities to build in larger blocks."

Both Keppel Fels and Keppel Singmarine are wholly owned subsidiaries of Keppel O&M.

Further afield, Mr Loh sees opportunities for Keppel's diverse units to link up in areas like gas.

"KrisEnergy, for instance, has offshore stranded gas fields, which Keppel O&M can possibly provide solutions for. The gas that is produced can then be taken by Keppel Infrastructure for its gas business, to fuel the power plant or for retailing through City Gas," he said.

However, he added that such solutions must make sense to the parties involved.

He said: "Only 3 per cent to 5 per cent of last year's net profit came from the buying and selling from one another within the group. There is a lot of potential there for us."

Mr Loh added that financially, the group can rely on the private real estate funds it has created under Alpha Investment Partners, while adopting a disciplined approach to pruning and monetising mature assets for higher returns.

He said: "Over the past 47 years, we have shown our capability in navigating cycles and finding good opportunities. This time, it will be no different."

A version of this article appeared in the print edition of The Straits Times on September 30, 2015, with the headline 'Multi-sector strategy to help Keppel ride out crisis'. Print Edition | Subscribe