Weak logistics business gives Keppel T&T headaches

Q4 profit from the segment declined 77%.

Keppel Telecommunications & Transportation is having a series of headaches from its logistics business after recording a slump in operating profit for 4Q16.

Keppel T&T's logistics business remained the major drag as its yields slumped 77% to $0.6m on the back of a weak occupancy rate and high start-up costs arising from its new China projects.

According to UOB KayHian, start-up costs were high for its Tianjin project for which occupancy rate has yet to pick up. Meanwhile, its Lu’an project is expected to only kick-off operations in 1Q17.

"Going forward, the outlook for KPTT’s China logistics business remains challenging but management is optimistic about its Southeast Asia business. Nonetheless, we were previously too early with calling out a bottoming in performance and the recovery of its logistics segment may only take place further down the road," UOB said.