Keppel T&T's net profit down 13% to $11.6m in Q1

Find out why the decline was not unexpected.

Keppel Telecommunications & Transportation reported a slump in net profits for the quarter ending in March, down 13% to $11.6m in Q1.

According to CIMB, the decline was not unexpected given the group's previous disposals of its 90% stake in KDC SGP 3 and 50% stake in Keppel DC REIT Management.

With this, operating profit fell to $1.7m in Q1. The impact, however, was mitigated by higher associate's contribution of $19.5m.

Here's more from CIMB:

Group DC revenue halved to S$5.9m in 1Q17 and operating profit fell to -S$0.1m (1Q16: +S$6.8m) due to the abovementioned sales. We note that a significant portion of the DC revenue in 1Q17 was facility management fees from its DCs previously sold to KDC REIT, and the rental contribution from Almere 2 (c.40% occupied) remained slow. We expect DC rental income to pick up from 2Q17 onwards, with fresh contribution from KDC SGP 4 (c.25% committed, due for completion in Apr 17).

The yoy lower logistics operating profit (1Q17: S$1.4m vs. 1Q16: S$2.6m) was likely due to: 1) the start-up cost for its Tianjin Eco-City logistics project (operation started in Sep 16) and 2) the loss-making position of Courex (acquired in Oct 16). Although yoy lower, we note that the S$1.4m operating profit was an improvement over S$0.6m in 4Q16, as KPTT made positive progress in ramping up its Tianjin operations and integrating Courex. 2H17 should see the contribution from the group’s Lu’an logistics project.