SINGAPORE - Keppel Corp delivered a total shareholder return of 49.3 per cent for the whole of 2022, compared with the Straits Times Index’s (STI) 8.4 per cent.
Also, Keppel’s total shareholder return reached 77.7 per cent over a 15-month period from January 2022 to end-March 2023, following the completion of the offshore & marine (O&M) transactions and the distribution in specie of Sembcorp Marine shares to Keppel shareholders.
In comparison, the STI’s total shareholder return for the same 15-month period was 9.2 per cent.
This was among Keppel’s responses to questions raised by shareholders ahead of its annual general meeting due to be held on Friday.
Replying to a question on why the company disposed of Keppel O&M just as the latter was starting to turn things around, Keppel said earnings from the O&M unit had been very volatile in recent years.
“Over the past five years, it ranged from a net profit of $157 million in 2019 to a net loss of $768 million in 2020. On average, the O&M business sustained an annual net loss of $178 million from FY2018 to FY2022,” it said.
Through the combination of Keppel O&M and Sembmarine, Keppel had a disposal gain of about $3.3 billion.
“Together with the vendor notes issued to Keppel from the sale of the legacy rigs to Asset Co, for which we will be repaid over time, as well as the out-of-scope assets, Keppel is unlocking close to $9.4 billion of value from the O&M transactions,” it said.
The vendor notes come with a coupon rate of 4 per cent that translates into some $170 million of interest income per annum.
“We will also benefit from a redemption premium equal to 5 per cent of the outstanding principal amount if and when the vendor notes are redeemed,” Keppel added.
Keppel said it is moving forward to transform itself into a global asset manager and operator to harness its capabilities in energy and environment, urban development and connectivity. It added that it has made significant progress in asset monetisation since October 2020, with more than $4.6 billion in asset monetisation announced by end-December 2022.
It said the company is on track to exceed the $5 billion target in 2023.
Asked how Keppel would negotiate the challenging global operating environment, the company replied that it has a strong track record for managing funds and playing a fiduciary role in looking after investors’ interests.
“This, coupled with our strong operating capabilities in energy and environment, urban development and connectivity solutions, presents a strong value proposition to investors of our private funds and listed Reits (real estate investment trusts) and business trust.”
Keppel said that despite offloading Keppel O&M, it continues to retain strong domain knowledge and engineering and operational expertise in energy and environment, urban development and connectivity.
The company also reiterated its objective of maintaining a generous but sustainable dividend policy.
“While we do not have a specific dividend policy, the board and the management are cognisant that dividends are an important consideration for our shareholders. We have in recent years endeavoured to pay out about 50-60 per cent of our earnings.”
In addition to its asset monetisation strategy, growing recurring income is a key tenet of Keppel’s Vision 2030 plans. As the group’s recurring income increases, it will have greater confidence to pay out more of earnings as dividends, Keppel noted.
