Keppel Corporation Limited

Good evening and welcome to the conference and webcast on Keppel Corporation's results and performance for the fourth quarter and full year of 2018. As a Chinese Lunar New Year is less than two weeks away, may I also take the opportunity to wish everyone good health, happiness and prosperity in 2019.

The international economic outlook has turn more uncertain in recent months with slowing global growth and create tensions amongst the world's largest economies. In China and Singapore, property market cooling measures have affected sentiments, although we continue to see healthy demand in key Chinese cities such as Chengdu and Tianjin where we have deepened our presence.

We are also seeing growing demand for cleaner forms of energy such as LNG, environmental solutions such as the WTE plants and data centers of which are solutions provided by the Keppel Group. Against a volatile backdrop, 2018 was a transformational year for Keppel as we continue to reinvent and position ourselves for long term growth.

Beyond executing our existing businesses, we are actively exploring and investing in new businesses such as senior living and renewable energy infrastructure with a view to developing future growth engines. We remain disciplined in picking only businesses that for within our mission of providing solutions for sustainable urbanization.

We are also growing our presence in B2C businesses. We have gained traction in urban logistics including last mile delivery and channel marketing to urban folks.

Now with over 50,000 households' customers in the retail electricity market, we are one of the leading electricity retailers in Singapore. We have also undertaken a strategic initiative together with SPH speech to gain majority control of M1 with the goal of transforming the business to compete more effectively and harnessing synergies from collaboration with different parts of the Keppel Group.

On 21st January, 2019, M1 published the opinion of its independent financial advisor that "the financial terms of the offer are fair and reasonable and not prejudicial to the interests of shareholders as a whole." The independent directors M1 conqueror with the advice of the independent financial advisor with respect to the offer and have recommended to shareholders to accept the offer and options proposal.

The offerer has subsequently announced that it does not intend to increase the offer price of 2.06 under any circumstances. We have also announced a scheme of arrangement to privatized Keppel T&T to better align its interest with the rest of the Group.

Despite the challenging economic outlook, true steps were taken in recent years to strengthen our call, build resilience and stay relevant with new business models and better value propositions for our customers, we will continue to execute on our plan to make Keppel a preferred solutions provider for sustainable urbanization. The Group performed well in 2018.

We achieved a net profit of 944 million, up 382% from 196 million in 2017. All up 16% from 815 million if we exclude the one off financial penalty of 619 million for the global resolution and related costs.

This was underpinned by improved performance across our O&M Property and Infrastructure Divisions, where Property making the biggest contribution to the Group. Our ROE 8.3% while the Group's economic value added was 252 million in 2018.

Our free cash flow stood at 515 million in 2018, against 1,802 million in 2017. Net gearing was 0.48 at end 2018, slightly higher than the 0.46 at end 2017.

The Board of Directors will be proposing a final dividend of $0.15 per share. Together with the interim cash dividend of $0.10 per share and special cash dividend of $0.05 per share distributed last August to celebrate Keppel's Golden Jubilee will be paying our total cash dividend of $0.30 per share to shareholders for the whole of 2018.

Excluding the special dividend, this represents a payout ratio of 48% of our net profit. Recurring income amounted to 247 million compared to 307 million in 2017.

We remained focused on improving the quality of our earnings and growing recurring income to be a stable contributor to the Group. Notwithstanding the recent volatility in oil prices, there is growing optimism in the O&M sector with more prospects, with more projects sanction at oil prices of between $55 and $65 a barrel.

With the gradually declining rig supply overhang, as well as increased tendering activity, there are signs of improvements in the offshore rig sector, although we do not beseech a V shaped recovery. In the immediate future, we are cautiously optimistic about the offshore production market.

We see opportunities in FPSOs especially conversions with several projects approaching FID in 2019 and 2020. Global demand for gas led by Asia continues to grow with a few FSRU projects also targeting FID later this year.

Keppel Shipyard has also seen a pick-up in ship repair works boosted by exhaust gas scrubber retrofits. We secure 65 of such contracts last year from a variety of customers.

Keppel O&M made a profit at both the operating and attributable levels for the full year, excluding RIDs on the back of our extensive rightsizing efforts and new contract wins. However the division registered a loss of 109 million after provisions including an additional provision of 167 million for expected losses on the rigs for Sete, Brazil, partially offset by right backs for provisions for claims.

We secured new contracts totaling 1.7 billion in 2080, which is more than the 1.2 billion of new orders won in the whole of 2017. Significantly, LNG and scrubber projects made up more than 600 million of the new contracts secured in 2018.

Keppel O&M's net order book has grown to 4.3 billion as at and 2018 compared to 3.9 billion at end 2017. Keppel O&M has received a limited notice to proceed from goal Golar LNG to commence early conversion works on Golar Gimi for BP's Greater Tortue/Ahmeyin field.

Full construction activities will commence when Keppel Shipyard receives the final notice to proceed. Hilli Episeyo, the world's first converted FLNG vessel which we delivered in late 2017 has maintained 100% uptime since we began commercial operations and has dispatch 13 LNG cargos to date.

Hilli's successful proof of concept as a quick and cost efficient solution for monetizing stranded gas reserves continues at momentum to new opportunities in the liquefaction vessels space. The Group remains committed to putting in place effective and robust compliance and governance regimes and discharging the undertakings given as part of the 2017 global resolution, KOM had reached with the relevant criminal authorities.

The enhancements to the compliance processes and procedures included increasing the resources of the Group's internal audit function and conducting anticorruption compliance audits. In 2018, KOM engage an ISO 37001 consultant to conduct a risk review and audit of anticorruption compliance at KOM.

And in November 2018, KOM's entities in Singapore achieved certification for the ISO 37001, anti-bribery management system. We will continue to strengthen our policies and procedures to ensure that we win business legally and ethically.

Our Property Division recorded a net profit of 938 million for 2018, up 44% from 650 million a year ago. Keppel Land made a net profit of 940 million, 41% higher than the 666 million in 2017.

ROE for Keppel Land was 11.4% while gearing was 0.19 as at end 2018. In line with our goal to make Keppel Land a real estate company with one of the highest returns in Asia, we will continue to increase our asset turns and make our property portfolio work harder for us.

We competed acquisitions totaling about 0.8 billion in 2018 including residential sites in China and Indonesia and a commercial development in Singapore in the fourth quarter. Over the year, Keppel Land has completed divestments and on block sales totaling about 1.7 billion.

We sold about 4,440 homes, half of which were in China, achieving a total estimated sales value of about 1.8 billion. This does not include the sale of five projects which is equivalent to approximately 11,500 units sold on block.

We expect to recognize revenue for some 8,410 overseas homes they have already been sold, amounting to about S$2.7 billion upon completion and hand over from 2019 to 2021. Over the course of 2018, we replenished our land bank with the addition of about 3,600 units in China and 500 units in Indonesia, bringing out total land bank to close to 50,000 homes.

We currently have about 19,000 homes in key Asian cities which are launch ready. In its commercial powerful, Keppel Land has about 1.5 million square meters of gross floor area of which about 60% is under development.

In China, we are positioning ourselves to capture more opportunities by selectively expanding and deepening our presence in high growth regions and cities. While property cooling measures have had an impact on the market, urbanization trends and growing income levels continue to drive demand for quality housing and commercial developments in key regions and cities.

We will focus in particular on the [indiscernible] region, Yangtze River Delta, Greater Bay Area and the Chengdu Metropolis, where we see considerable growth potential. Keppel Land currently has a sizeable land bank of about 21,800 homes in China.

In 2018, we completed new investments amounting to 680 million to expand our portfolio in Nanjing, Chengdu and Sino-Singapore, Tianjin Eco City. We continue to see healthy demand supply balance in these markets with the supply of homes would presume permits is expected to be absorbed in less than six months.

Our Infrastructure Division delivered a net profit of 169 million for 2018, an increase over the 134 for 2017. Keppel Infrastructure continued to perform with a net profit of 117 million in 2018 compared to 109 million in 2017, mainly due to better performance from environmental infrastructure and infrastructure services.

In 2018, we secured some 120 million worth of contracts for energy and environmental infrastructure across Singapore, Australia and Europe. The construction of the Keppel Marina East Desalination Plant has achieved 65% completion.

Meanwhile, the design and engineering for the Hong Kong integrator waste management facility are on track and the project will contribute our bottom line from this year. Last year, Keppel Electric became the largest electricity retailer in Singapore in terms of market share in the commercial and industrial sector.

We will continue to improve on its offerings to further extend its reach into the household electricity market. Preliminary results show that it is among the electricity retailers with the largest market shares in the open electricity market.

Keppel Logistics continue to grow its omnichannel business. As channel management customer base has grown significantly, while deliveries double in the cause of 2018, partly due to impairment loss on an asset and investments into building new capabilities to transform the urban logistics business, we incurred a loss of 24 million largest sticks and other operations.

Our data center business contributed 76 million for 2018, an increase over the 15 million for 2017. During the year, the Group acquired four new data center projects across Asia and Europe.

We've expanded our portfolio from 9 in 2014 to 22 data centers today with a total value of about 2.7 billion. The total net lettable area of the Group's data center portfolio has grown from 0.6 million square feet in 2014 to 1.7 million square feet in 2018 registering a 32% CAGR over the past five years.

To further grow its capabilities, Keppel T&Ts also exploring innovative concepts including high rise data centers and floating data center parks which utilize naturally chilled water to cool the facilities. The performance of our investment division was affected mainly by our share of losses relating to KrisEnergy.

We have also made a provision amounting to 53 million for impairment on investment in an associated company. 2018 was an active year for Keppel Capital which announced acquisitions worth over 2 billion and explore new platforms for long term growth, including expanding into new markets and asset classes.

Alpha Investment Partners, Keppel Capital's private fund management arm has announced the final closing of the AAMTF III which raise a total of about U.S.$1.1 billion. AAMTF III is the third value-add pan-Asian fund in the Alpha Asia Macro Trends series, which focuses on mega trends driving long-term growth in the Asia-Pacific.

Our asset management business continued to contribute steadily to the Group though earnings were lower year-on-year, due to higher expenses for Group initiatives, lower fees following divestment of several assets and lower one off performance fees. Our recent trusts have continued to expand and optimize their asset base to deliver value for unit holders.

Keppel Infrastructure Trust has proposed the acquisition of IXOM which is amongst the leading industrial infrastructure businesses in Australia and New Zealand supplying and distributing water treatment chemicals as well as industrial and specialty chemicals. Keppel Capital's total AUN remains stable at about 29 billion as at end 2018 following a few divestment by Alpha.

Leveraging our track record in master development, Keppel Urban Solutions has signed an MoU to collaborate with Envision Technology Group to develop a new smart IoT City in Wuxi, we are familiar with Wuxi where Keppel Land has been active for more than a decade and we see good growth potential in the city. Reflecting the continued growth of the eco city, the Sino-Singapore Tianjin Eco-City Investment and Development Company saw three residential land plots with top of the then site area of around 28 hectare for RMB3.4 billion in 2018.

One plot was acquired by Keppel Land to build on a strong track record and tap the healthy demand for homes in the eco city. So far Keppel Land has sold about 98% of the 4,500 homes which it has launched in the eco city.

Notwithstanding the challenging micro-environment, urbanization trends continue to present many exciting long term opportunities for Keppel whether it is providing energy, property, environmental solutions or connectivity. We will remain focused on building a nimble and agile Keppel ready to seize opportunities in our existing businesses even as we grow new engines for the future.

We will also further strengthen collaboration both within the Group and with the parties to provide more robust solutions to shape a sustainable future. I will now invite our CFO, Hon Chew to take you through the Group's financial performance.

Thank you.

Thank you, Chin Hua, and a very good evening to everyone. I shall now take you through the Group's financial performance.43 In the fourth quarter of 2018, the Group recorded a net profit of 135 million as compared to a net loss of 492 million recorded in the same quarter in 2017.

Given the size of the impact of the global resolution and its one off nature in 2017, the analysis of the fourth quarter and the full year results in the following slides is normalized to exclude the global resolution penalty and related costs in 2017. This is done to allow a more meaningful analysis of the underlying performance of the Group.

So on this basis, the Group's fourth quarter net profit of 135 million was 8 million or 6% higher year-on-year and EVA correspondingly improved from a negative 267 million to a negative 132 million. The Group's revenue for the quarter was 9% higher than the same period in the preceding year.

All divisions except Property Division registered higher revenues during the quarter. Operating profit for the quarter decreased by 97% or 142 million to 5 million, despite registering higher revenues.

This was attributed mainly to lower fair value gains on investment properties in the Property Division, higher provisions for expected losses on Sete contracts and provision for impairment of an associated company in the Investment Division. Profit before tax decreased by a small extent of 19%, mainly due to a higher share of profits from associated companies mainly the Sino-Singapore Tianjin Eco-City Floatel International and Keppel DC REIT.

After tax and non-controlling interest, net profit was 6% higher at 135 million translating to earnings per share of $7.04. In the next slide, we take a closer look at the Group's revenues by division.

In the fourth quarter of 2018, the Group earned total revenues of about 1.7 billion, 9% higher than the same quarter in the preceding year. The Offshore and Marine division reported a 6% increase in its topline as a result of higher revenue recognition from ongoing projects.

Revenue from the Property division saw a 14% decline due mainly to absence of revenue compared to the same quarter in 2017 from Highline residences which was fully sold by first quarter this year, also lower revenue from reflections at Keppel Bay and Park Avenue in Shanghai. These are partly offset by higher revenue from Estella Heights in Ho Chi Minh City, Waterfront Residences in Wuxi and Zhouzhuang [ph] in Shanghai.

The Infrastructure division achieved 25% growth in revenue as a result of increased sales in the power and gas business, as well as higher progressive revenue recognition from the Keppel Marina East Desalination Plant project. Moving on to the Group's pretax profit.

The Group recorded 164 million of pretax profit for the fourth quarter of 2018, 19% lower than the same period in 2017. The Offshore and Marine division registered a lower pretax loss of 97 million compared to 256 million loss in fourth quarter of 2017.

These are rose from improved operating performance and higher contribution from associate companies. Operating loss in the fourth quarter of the 2018 was mainly due to provisions for expected losses on the Sete contracts and the other asset impairments partly offset by a provision for claims.

The Property division's pretax profit was 40% lower, due mainly to lower fair value gains on investment properties. The Infrastructure division's pretax profit for the quarter was slightly lower at 15 million.

The division's lower operating profit, due mainly to operating loss from logistics operations was largely offset by higher share of profit from associated companies. The Investments division recorded a pretax loss of 4 million as compared to a pretext profit of 45 million in the same quarter in 2017, mainly due to impairment of investment in associated company and lower contribution from the asset management business.

This was partly offset by higher share of profits from the Sino-Singapore Tianjin Eco-City benefiting from the sale of land plot this quarter. After tax and non-controlling interest, the Group's net profit increased by 6% or 8 million with the Property division being the top contributor to that Group's earnings followed by Infrastructure division.

I shall now take you through the performance for the financial year 2018. The Group recorded a net profit of 944 million for the financial year 2018, which was 382% higher than in the preceding year.

Excluding the one off penalty and related costs in 2017, the Group's net profit of 944 million was 16% or 129 higher in the preceding year, due mainly to high operating profit, partly offset by lower share of profits from associated companies and higher taxation. Consequently, ROE increased to 8.3%, our EVA was also higher at 252 million.

Free cash inflow for the year was an inflow of 515 million as compared to an inflow of 1.8 billion in 2017. This was due mainly to the payment of the financial penalties to the United States, Singapore and Brazilian authorities amounting to S$464 million arising from the Keppel Offshore and Marine's global resolution as well as the higher working capital requirements from Offshore and Marine and Property divisions.

The Group's net gearing increased slightly from 0.46 at the end of 2017 to $0.48 at the end of this year. In the next slide, we take a closer look at the Group's revenues by division.

During the year, the Group earned total revenues of 6 billion at the same level as last year. The Offshore Marine division recorded an increase in revenue or 4% due mainly to revenue recognition in relation to jackup rigs sold to Borr Drilling Limited and also higher revenue recognition from ongoing projects.

Revenue from Property division saw a 25% decline, due mainly to lower revenues from The Glades and Highline Residences in Singapore and China training projects as number of units whereas low a number of units were handed over from projects such as Park Avenue Heights in Chengdu and Park Avenue in Shanghai as well as absence of revenue compared to 2017 from the Glades which was fully sold in 2017. This was partly offset by higher revenue from Park Avenue Heights in Wuxi, Waterfront Residences in Tianjin and Waterfront Residences in Wuxi.

Infrastructure revenues increased by 19% led by increased sales in the power and gas business, partly offset by lower progressive revenue recognition from Keppel Marina East Desalination Plant. Investments revenues decreased by 30% mainly due to lower contribution from asset management business and absence of sale of equity investments compared to last year.

Moving on to the Group's pretax profit. The Group recorded a pretax profit of 1.24 billion for 2018, 17% higher than in 2017, despite relatively flat Group revenues.

This is boosted by on block sales of development projects in China and Vietnam and improved operating performance at Offshore and Marine division. Offshore and Marine division record a lower pretax loss of 113 million, arising mainly from improved operating performance, higher contribution from associate companies and lower net interest expense.

As mentioned previously, provisions for expected losses on the Sete contracts and other asset impairments, net of the write back of provision for claims contributed partially towards the operating loss for the year. In the Property division, pretax profits increased by 41% to 1.2 billion.

This was due mainly to on block sales of development projects in China and Vietnam, namely Zhongshan, The Seasons in Shenyang, Hunnan in Shenyang and Quoc Loc Phat in Ho Chi Minh City, as well as gains from divestment of Beijing Aether. The increase was partially offset by lower fair value gains on Investment properties, lower contribution from associated companies and lower net contribution from the property trading segment.

In the prior year, the Property division's pretax profit also benefited from on block sale of Waterfront Residences in Nantong to Guangzhou project Indonesia and Central Park City in Wuxi, as well as the divestment gain on Sedona Mandalay and the Bali project. Pretax profit from the Infrastructure division increase by 8% to 184 million.

This was due mainly to dilution gain following the change of interest in Keppel DC REIT, gain arising from the units in Keppel DC REIT and high contribution from infrastructure services and environmental infrastructure as well as higher share of profits from associated companies. The increase was partly offset by lower contribution from energy infrastructure, higher losses from logistics and absence of the prior period's gain from divestment of GE Keppel Energy Services.

The Investments division registered a pre-tax loss of 19 million as compared to a pretax profit of 290 million in 2017. This was the result of impairment of investment in an associate company and lower contributions from the asset management business and the Sino-Singapore Tianjin Eco-City.

In addition, the Divisions profits in 2017 was also benefited from the write back of provision for impairment of investment in an associated company, sale of equity investments and contribution from K1 Ventures. After tax and non-controlling interests, the Group's earnings increased by 16% to $944 million, with the property division being the top contributor to the Group's earnings followed by the Infrastructure division.

The Group's net profit for the financial year 2018 was $944 million which translated to earnings per share of $0.52. ROE increased to 8.3% in 2018 from 6.9% in 2017.

Our proposed final dividend to our shareholders for 2018 will be $0.15 per share. Including the interim dividend, a special cash dividend paid, the total distribution for 2018 will be $0.30 per share.

Cash flow from operations was 548 million as compared to 519 million in 2017. After accounting for working capital changes, interest and tax, net cash inflow from operating activities was 125 million as compared to an inflow of 1.2 billion in 2017, due mainly to the payment of financial penalties to the United States, Singapore, Brazil authorities amounting to 464 million arising from Keppel Offshore and Marine's global resolution and higher working capital requirements in the Offshore and Marine and Property divisions.

Net cash generated from investing activities amounted to 390 million comprising divestment proceeds and dividend income from associated companies totaling $1.1 billion. This is partly offset by investments and operational CapEx of 450 million as well as net repayment of the advances from associated companies of 217 million.

As a result, there was an overall cash inflow of 515 million for 2018 as compared to an inflow of 1.8 billion in 2017. With that, we have come to the end of the results presentation segment, and I shall hand the time back to our CEO for the Q&A section.

Thank you, Hon Chew. Before I start, I think we've been introduced to the panel but I want to draw your attention to Mr.

Tan Swee Yiow. This is his first meeting with all of you.

He's of course taken over as CEO of Keppel Land on January 1 this year. So let's start with the questions from the floor if any.

Yes, Cheryl, so waiting for you.

In Ho Chi Minh, I think we generally experiencing still very healthy demand and our launchers are generally well received. Same is applied for Wuxi and you're notice that we also venture into key cities in China where we believe that the supply demand present a more balanced situations, so in the like Ho Chi as well as Tianjin Eco-City.

I'm sure Cheryl has a follow-up question. No, that's it.

Okay. Any?

Yeah, Conrad?

Can we talk a bit more about the provisions in O&M Sete Brazil the right back payment?

Okay. I'll ask Hon Chew to address that question.

Okay. It's you want to cover all the impairments are provisions.

Perhaps I shall turn your attention to pitch through of the SGX net so that I can go through the numbers. Your first asked about Sete Brazil, so the provision for expected loss on contracts you see on Page 2, a footnote of Roman numeral 22, this year there was a provision for 167 million compared to provision of 81 million last year.

So as you know, we explained in the past this provision was made, really looking at the various possible scenarios and at each quarter and especially so for year-end, we do a review of the assumptions and taking into account the developments we will then look at the provision position as of the year-end. The process we went through a quite robust review by auditors, our KOM audit committee and KCL audit committee before we came through the provision.

So this is the provision that we believe is at this point in time for Sete Brazil. I haven't finished but if you like to follow-up maybe you can follow-up.

I do understand that but I thought we were kind of - so this is based on the rates that you see in the market or is it based on your potential plan to divestures or what other key development that you have seen that you make further provisions like that?

As I say, I think as we see in the past, the provisions made based on a few scenarios, right. And those scenarios in terms of the probability would change overtime as developments as the progress in the especially some of the developments in Brazil concerning such as creditors meeting and so on.

Up they also look at the some of the assumptions including day rates, including exchange rates and so on. So all these updates result in adjustment to our provision.

But as you would appreciate you know you'd be - they have many commercially sensitive issues I will not be able to explain to you these scenarios in detail. So that's such a provision.

You also asked about the write back, so that's a write back of 96 million for provision of claims, these are customer claims in Keppel Offshore and Marine. And again as you would appreciate this very commercially sensitive, I will not be able to review which are the customers.

And if you look at Page 2 again, there is also impairment of investments and associated a companies. So in total for the year, there's a 60 million of impairment compared to a write back last year.

I think it was also mentioned in the presentation earlier at the under Investments division, there was a write back of 53 million, whereas last year there was a write back. This as a provision, last year was a write back.

Apart from that, there was also a provision for contract assets 21 million this year, this relates to one of the jackup rigs. And again as I explained earlier at every quarter-end and year-end especially we do a review and as a result of review, the same process I described, we have a provision of 21 million for one of the rigs.

I believe those are the key provisions.

There's a question from the net which also released, so maybe I'll take it. This is from Nicholas Lim, an investor an investor in Singapore.

Nicholas question is, is Keppel O&M expect to have completed most of the write-offs for the Sete Brazil rigs with the latest 167 million provision in fourth quarter or is there a high likelihood of more write-off for the Sete projects still to come? I think as you have heard from the CFO, we believe that the latest provision is adequate and for now, okay.

So we just - on the impairment, so there is an impairment of associates investment, what is it?

Yeah. It's again each quarter and year-end, we look at all our investments including investments associates, so there was a provision made.

The biggest investments division but we are not able to disclose the company because some of these investments are actually listed companies.

You can maybe ask a question we can answer. I think Conrad was - you have another question?

So, I'll just ask one question that you'll be able to answer, outlook for your O&M? Surely you can.

Oh, of course that one we can. I'll ask Chris Ong.

As mentioned in CEO's speech, we do not really expect provision recovery based on the development plan from all majors, you can see that more projects are coming online for FID in 2019 and 2020. So we are optimistically - we are optimistic, sorry.

Nonetheless, they are different areas that we are targeting at not only in oil and gas sector, we have always been saying that our diversification plan has gone ahead and we are looking at even renewables project so far So we have basically 1.7 billion revenue last year and based on that itself I think we should also focus a lot on operation excellence on top of the market and so, yeah.

I think to add I think QMS as you all know we've gone through quite a number of years of write sizing. We are extremely pleased at last year, we were able to breakeven, make a small profit before impairment.

So I think if things start to brighten up a bit and we start to get more orders that would flow down to a bottom line. Of course, we continue to have to work very hard.

And as I've said, we hope for the best but we don't expect a V shaped recovery. Okay, Conrad.

Thanks a lot. So just to follow-on from the recovery, can we think about higher order flow in 2019 than 2018?

Is that one way to think about your optimism, if we were model it into our numbers?

Well, first of all, you know Conrad, we don't provide guidance on all of this. But of course, last year all of this as you've seen is stronger than the year before and we are cautiously optimistic for this year.

But I think there's still a lot of headwinds, so we are cautiously optimistic.

And then with respect to the gas vessels on the conversion, which is the limited notice to start work? What does that mean?

Are you starting work on it or?

Chris you want to? This is on the Gimi, right?

Yeah.

I think the limited notice to proceed includes frontend engineering ordering of some longly items and limited works on the vessel itself. So we actually, BPS actually announced that they would take roughly about another quarter to put all the contracts in place.

So for the next four months, we will be embarking on all our frontend work on that. We think for the notice to proceed to come away.

So that implies that we'll have revenue recognition on this vessel this year?

Yes.

And then what is the status of, isn't there a third vessel in this series of 3 that you had ordered. What is the status of this one now?

I think this one before we talk about that, we have noticed long noticed to proceed. I think that I'm not sure that you mentioned it but you have four months, right?

Yes, yeah, four months.

And so it's like and we know that BPS announce its FID December last year on this particular project. So we would expect that we will go and proceed on to FID for this.

So if they all comes to pause then we would expect that Gimi will become a part of to contribute to the top line for this year.

Sorry, yes, your question, Conrad?

Just on the third vessel.

Yes, the third gas conversion.

I believe you are talking about Gandria.

Yes, sorry.

I think for Gandria itself the contract has been extended by Golar and we are top three. Golar to talk about the potential deployment for the vessel itself.

So this is something that's ongoing and we will inform when there is a material progress in this.

And then just my last question. On the property business, specifically in China, you mentioned that there is strong underlying demand in your end markets but is there any sense that the cooling measures are being used in the markets that you're in?

Are we seeing any sign that we could see some relief in that area?

Swee Yiow, you want to take that?

Not yet at the moment. I think for property business, we always operate on the basis that's the cooling measure may not be lifted, so we just have to operate under the existing conditions.

I think Swee Yiow is correct, there is - the cooling measures are in place. But I think unofficially we are starting to see perhaps they are not so stringent in applying some of these in some markets.

But as I think as we are said we can't really kind of take this for granted. The other part of course is I think on the demand side, the economy is cooling, so we are watching that very closely.

Hi, Cheryl from UBS with some follow-up questions. On the property side, can we just get some clarification, I recalled in the last quarter, there was some gains on bonds from Nam Long I think, which would have been booked in this quarter.

So just to clarify which segment like under property trading or investment and also how you know does this are really back to Page 2?

Okay. Maybe if you don't mind Cheryl, there's a question that's popped up from the net that's related to what you just asked.

Can we take that together? So this question is from Su Wei Fu of [indiscernible] in Singapore.

Hi, thanks for taking my question. For the property division apart from KPN Keppel Allianc gains, were there any other divestment gains or revaluation gains in fourth quarter 2018 and how much was it.

Can I ask Hon Chew to address that?

Yeah, okay. I think perhaps just to highlight a number of the more mature items, I think relating to earlier question, yes there's the divestment and conversion gain on the convertible bonds that's indeed taken up in the fourth quarter.

And also there is a divestment of 20% stake in OFC by Keppel REIT, that's of course at the associate level. And this actually tied to complete 19 and 28, so these are that they remain divestments for quarter.

So, can I just clarify so for Keppel, a Keppel Corp, so what was the - for your gains on OFCs so this would be, where will we see on Slide 11 and also which line is it on in the mass net?

So this would actually be under the share of associate line. So it will be part of pitch one of the net share of associated companies because this is actually the sale by Keppel.

Okay. And then sorry, just a follow-up question on again on property.

Could you just update us on your plans for Nassim Woods?

Swee Yiow?

Nassim Woods, we have commenced looking at the redevelopment, so we are just in the design development stage as in when the plans are, we will make some further announcements, but tentatively we are looking at bring it to about 100 units of high-end condominium.

Yeah, I think a question from the net, is a question from [indiscernible] of Morgan Stanley. Oh, I got your name correct.

In O&M market, well we have seen new order wins, can the management talk about the competitive intensity? Also, what does the management think what 4Q 2018 in securing the new orders.

Chris Ong, you want to?

I think in terms of the market competitors and a competitive intensity, the challenge and hit win in the market is not limited to any region is basically good. So for all the yachts out there and the solution providers still be competing very rigorously in terms of cost base.

Therefore, I think the intensity is high because there are - yes here are competitors they're hungry. But what worked for us in 2018?

I think we stick to our core, which is our core competency work on our people which is our best value. When we are customers, be close to them and we have been working at a frontend and we've a lot of our customers, we show for some of the repeat orders returning customers.

And also at the same time, investing in our people, investing in our assisting facilities. We've new digitization tools and also be able to work on our cost factor, so that we are cost efficient.

At the end of the day it's also execution excellence. That means the ability to deliver our projects as promised within budget.

And I think the customers are glad to what with us again. Most important of course is the safety record that we have all these years.

Thanks, Chris. Just to add two points.

I think I've said this before was O&M is always looking to win top lines. We have to remain quite disciplined especially in today's market because the market is still very competitive.

So it's not just about winning orders by, it's making sure that we the right orders from the right customers with the right profile and margins et cetera. So this is - this discipline has to continue.

The other thing I think we have done in recent times, we size rightsizing KOM is that KOM has also integrated further. So it has made the three business units within KOM, Singmarine, Keppel Shipyard and Keppel FELS are now working closely as one KOM and are sharing resources, they are sharing construction methodology.

So there's a lot of synergies that have been derived through this couple of years. So I think we are - we put ourselves in a very competitive position.

And we're waiting for the market to come back. Okay.

I think one more question from the web. This is from Mr.

Fu again. I have two more questions, for SSTEC was profit from all three land, so recognized in the 48 million for financial year 2018?

Second question with profits from land sales at 120 million in financial year 2017 and 48 million in financial 2018, how do you see land sales for this year? So maybe Hon Chew you want to take the first question.

Okay. For the first question.

I think Swee Yiow mentioned that there were three land plots that were actually sold but not all tree have been recognized this year. The three land plots I think in terms of the plot, the number is plot 6 and 31 which have been recognized in the year but plot 10 has yet to be recognized.

That the references, I think you can refer to Page 60 of the Slides there are some additional information on the land plots.

I think on the second question, first of all, of course we don't give any guidance on what this year. But certainly land sales have been affected by the cooling measures.

Cooling measures are also quite strict in terms of the sale of land and that makes it more difficult for developers to bid. So if this cooling measures continue then land sales could be affected.

But we also see that, as I said earlier, there is pretty good supply demand situation in Tianjin Eco-City where developments with sales permit should be as of within six months of launch. So I think on from this call, there is shortage of homes that can be sold.

So developers would likely be attracted to bit for land again. But again you know it's difficult to predict whether this year will be better than last year.

Yes?

Hi, it's Siew Khee. I've got go some follow-up questions.

Still going back to the impairment, just wanted to check, excluding all the impairment, is 4Q EBIT level, it's profitable or still loss because there are some write backs that could be above and?

You are referring to the Offshore and Marine?

Is it just O&M is it?

Yeah, at the operating level, is it profitable or if it's loss how much is it?

Even at the net profit level, I think excluding all the RIET's, we are profitable, even at that profit level.

It's profitable, yeah. Yeah, EBIT level?

It should be profitable.

Yeah.

So, it's profitable, right?

Yes. Correct.

I mean net profit is after interest, after tax. EBIT is before, so definitely.

So that is operation you're quite good. I mean can we expect this?

Thank you.

Well, we accept it's quite good. Can you expect no answer?

We hope like that. I mean we've been working towards this breakeven for a while, so I would let that we have reached that.

Okay. I have two more questions.

The other one is, is there any, I know you have delivered some rigs to Borr Drilling, have they been paying or is there any challenges in receiving payments from them?

Actually, no issue, in fact. I thing I don't know whether we can discuss disclose this, but there's some discussion about bringing forward some of the deliveries.

Okay. Thanks.

And also Keppel Capital, you had excluding associates impairment at Keppel Capital, is it better because I remember last quarter we had some upfront investment cost that you have made, how did it do this quarter?

There is no impairments at a Keppel Capital.

I think is investments, this is under the Investments divisions.

From associated, I think company…

Is correct. Investment division

No, no, Keppel Capital.

So Keppel Capital is part of the investment divisions. Between the investment divisions, there were some impairment on associates but not….

Not, not from….

What I mean is, how did Keppel Capital do this quarter? Is it stable or?

For this year, I think our profits are a bit lower partly because if you read some of the reports we have been looking to do quite a few big deals and some of the deals are pushed to the right, partly because sometimes we have to get governmental regulatory approvals in some of the countries that we're dealing with. So timing wise, we miss a bit of that.

But I think of this year we should be closing the deals, so we should be looking to lock in some of these fees and profits this year.

Okay. Thank you, Chris.

Okay maybe I take the question from the web. This is from Mr.

Kwok of Citi Research Malaysia. What is the current stage of work on the Awilco semi-sub?

Had work begun in 4Q, 2018 and can we expect this to further ramp up heading into 1Q, 2019 to lift O&M revenues? Or you guys are thinking quarter-by-quarter?

Can I ask Chris Ong?

I think during the last quarter, we mentioned what was start in fourth quarter, we were roughly about 10% in our progress right now and we expect that construction activities to hit on in to 2019.

Yes, Cheryl.

Sorry. I have a follow-up question on O&M.

When I refer to the analysis on the MES Net, so when I compare 14 and 15 and I look at the net assets for O&M, there is quite a big difference, there is quite a big jump, if you could share some thoughts on internal, I'm thinking how that Group has - how Keppel has moved around? Thank you.

Sorry, you are referring to the segment report on the net assets comparing to 2017. There is an increase many because, yes I think there's an increase of…

So it's going from 1.2 billion to 2.9 billion?

Yeah. That is a capitalization done during the year.

This is to help to brief up the balance sheet of Offshore and Marine. And this will be useful for them in terms of like wining contracts and so on.

Although we are, we always say we have one balance sheet but it's still important to look at the balance sheet of our subsidiaries, especially those that need to go to beat the contracts. So that's the main reason, is the capitalization.

And so previously this would have been sound like sitting at top level, is that to understand?

Well, it's from issuance of equity instruments by KOM Keppel Corp the parent.

Understanding, thank you.

Conrad, Yeah.

Sorry. Just to get back to the provisions in O&M.

I guess I'm interested to know if there has been any news on the Sete front itself, have you had any more communications from them or has anything about around Sete itself. Thanks

I think is nothing more than what you have read in the press. I think there is now an agreement in principle between Petrobras and Sete.

And I think there is going to be a bit, there was going to be I think the bit was going to be officially launch I think on the 19th, but that has been delayed. So we'll see.

But I things seems things seems to be coming to a head which is good. So we're looking forward to getting this finally resolved once and for all.

Okay, if no questions from the floor, there's a question from the web, is from MR. Lai of an investor in Singapore.

You have many data centers in many countries, do you have any potential data centers coming up in China, if so which are the cities in China that you're looking at? So maybe I ask Thomas?

Thanks Mr. Lai for the question.

In the fourth quarter last year, Keppel Data Centre announced a cooperation agreement with Xiangjiang Science & Technology and Cloud Engine Network Technology to look at opportunities in China. And we are specifically currently doing due diligence work and negotiation in projects in cities in Beisanhuan, Beijing and Zhengzhou.

So we will make the announcement when we have a definitive agreement. Thank you.

Thank you. Any further questions?

If not, thank you very much for your attention. Have a great year ahead.