Here’s how Keppel T&T manages challenges during its logistics transformation

A mega project could be in the works.

Keppel Telecommunications & Transportation (Keppel T&T) logistics business is changing its business model, but a complete turnaround could not come immediately until 2019.

According to UOB Kay Hian, its Courex acquisition stands at the core of its transformation as the company captures additional parts of the value chain.

Feedback from clients using its omnichannel management solution has been positive.

Meanwhile, a mega project for its data centre (DC) business is believed to be in the works.

The demand for cloud-enabled DCs remains stable, with more looking for larger critical capacities and higher power densities.

UOB Kay Hian analysts Edison Chen and Foo Zhiwei said, “We believe at least one large-scale project, done through ADCF, is in the works, which will generate substantial fee income given its size. Hence, KTT will continue to see earnings growth (albeit delayed) despite the divestment of KDC SG4.”

Here’s more from UOB Kay Hian:

Our review of KTT revealed that its chosen DC development strategy was different from what we originally expected. While we had expected KTT to focus primarily on developing its own DCs, the focus is now on supercharging the development cycle together with ADCF.

While this increased speed of development cycle will likely be beneficial in the long run, it will result in short-term earnings uncertainties. We want to take a conservative stance, and thus have removed our original assumptions for operating earnings in divested and future DCs.