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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
A very good afternoon, ladies and gentlemen, and we welcome all of you, including those viewing this conference over the web, to the conference for Keppel Corporation's Fourth Quarter and Full Year Financial Results for 2019.
First, let me introduce the members of our panel. Seated from your left to right are Mr. Manjot Singh Mann, CEO of M1; Mr. Tan Swee Yiow, CEO of Keppel Land; Ms. Christina Tan, CEO of Keppel Capital; Mr. Chan Hon Chew, CFO of Keppel Corporation; Mr. Loh Chin Hua, CEO of Keppel Corporation; Dr. Ong Tiong Guan, CEO of Keppel Infrastructure; Mr. Chris Ong, CEO of Keppel Offshore & Marine; and Mr. Thomas Pang, CEO of Keppel Telecommunications & Transportation.
Our CEO, Mr. Loh Chin Hua, will first present an overview of the group's business and outlook. Thereafter, our CFO, Mr. Chan Hon Chew, will present the group's financial results. This will be followed by a question-and-answer session on the company's performance chaired by Mr. Loh.
Without further ado, I would like to invite Mr. Loh Chin Hua to give his opening remarks. Mr. Loh, please.
Good evening. Welcome to the conference and webcast on Keppel Corporation's results and performance for the fourth quarter and full year of 2019. With the Lunar New Year just around the corner, may I also take the opportunity to wish you all good health, happiness and prosperity in the new year.
2020 is an important milestone for Keppel. In 2014, the group adopted a vision 2020 to guide our long-term strategy and transformation. It includes comprehensive targets related to financial performance, people, processes and our broader stakeholders.
Over the past few years, we have made significant progress towards our vision. These include privatizing our listed operating entities to facilitate better capital allocation, strengthening our existing businesses as we grow new engines, establishing Keppel Capital as a platform for capital recycling and to tap third-party funds for growth as well as growing from being mainly a B2B company into the B2C space.
We have also actively promoted collaboration among our business units and united the group behind a common mission. Today, Keppel is an ecosystem of companies providing solutions for sustainable urbanization. We see sustainability has been core to our strategy, not just in terms of how we deal with ESG issues, but also by -- as a source of business opportunities as we channel the group's capabilities and resources to meet the needs of a sustainable development.
Against a volatile and challenging 2019, characterized by slowing global growth, trade tensions and geopolitical risks, Keppel has performed creditably. For financial year 2019, we made a net profit of $707 million with improved performance by Keppel O&M, Keppel Infrastructure and Keppel Capital.
Net profit for the group was lower year-on-year as Keppel Land had benefited from a few lumpy divestments and en-bloc sales in 2018, which contributed $584 million to net profit. Significantly, the group's earnings in 4Q 2019 were up by 42% year-on-year due to stronger performance by the O&M, Property and Investments divisions.
ROE was 6.3%, while our free cash outflow stood at $653 million in 2019 compared to the cash inflow of $515 million in 2018. Net gearing was lower at 0.85 as at end 2019 compared to 0.88 as at end September 2019 due mainly to cash inflows from operations and higher capital employed arising from profits for the quarter.
The Board of Directors will be proposing a final dividend of $0.12 per share. Together with the interim cash dividend of $0.08 per share, we'll be paying out a total cash dividend of $0.20 per share to shareholders for the whole of 2019. This represents a payout ratio of 51% of our net profit.
We continue to focus on improving the quality of our earnings. Recurring income has grown to $260 million compared to $232 million in 2018, largely due to higher contributions from asset management, infrastructure and the consolidation of M1.
The O&M industry continues to show signs of recovery. The utilization and day rates for jackups continue to improve, but it would take some time for this to translate into new orders given the continuing oversupply in the market.
The outlook for the floater segment is also positive, with activity and demand expected to increase gradually in the next couple of years. In the near term, we will continue to actively seek opportunities in the oil and gas production market where a number of project FIDs are expected in 2020. We will also pursue projects in the growing offshore renewable sector as well as niche segments of the specialized vessel market.
On the back of our increased top line, cost management efforts and lower impairment provisions, our O&M division achieved a net profit of $10 million, a significant improvement over the loss of $109 million in financial year 2018. This is the first time our O&M division has returned to profitability since financial year 2016. The operating profit in financial year 2019 was $76 million before RIDs, more than double the $37 million for financial year 2018.
During the year, Keppel O&M remain focused on execution, delivering 13 newbuild and conversion projects. In addition, we started 2020 with the delivery of the fifth out of 11 jackup rigs that we're building for Borr Drilling. Our new order wins for 2019 were in excess of $2 billion, up 18% compared to 2018.
Keppel O&M's diversification strategy has borne fruit, with gas and renewables making up over 60% of these new orders. During the year, we also secured over 100 scrubber and ballast water treatment system retrofit projects as shipowners sought to meet the IMO 2020 requirements on the sulfur content of marine fuel as well as the standard set out by the Ballast Water Management Convention.
Our net order book stood at $4.4 billion as at end 2019. To manage the increased workload, Keppel O&M hired 2,800 additional direct employees over the course of 2019, more than we had original -- initially anticipated. And we expect to increase our headcount by a further 1,500 in 2020. With Keppel O&M having returned to profitability, our goal for 2020 is to further enhance the performance of our O&M business.
Our Property division recorded a net profit of $517 million for financial year 2019. Keppel Land's net profit stood at $527 million for financial year 2019, 44% lower than the $944 million the year before due to the fewer en-bloc sales and divestments last year. If we were to exclude en-bloc sales and RIDs in both years, Keppel Land's net profit in financial year 2019 was about $260 million, an improvement over the $236 million in financial year 2018.
To further expand our Property business, we completed 9 acquisitions, totaling about $0.5 billion in 2019 across China, Vietnam and India. We have also broken ground for Saigon Sports City, which Keppel Land and Keppel Urban Solutions are collaborating to develop into a smart integrated township in District 2 of Ho Chi Minh City.
Our Property division is diversified across several key Asian markets, with China and Vietnam contributing 36% and 31% of Keppel Land's net earnings, respectively. Vietnam, in particular, has been a growing market for the group, with earnings growing steadily and contributing $165 million to Keppel Land's net profit in financial year 2019.
In 2019, we sold about 5,150 homes, 16% more than the 4,440 homes sold in 2018, achieving a total sales value of about $3.2 billion. Despite the slowdown in the Chinese economy, we continue to see healthy demand in the cities where we operate. Home sales in China grew by more than 50% year-on-year to 3,400 units with a total value of about $2.2 billion compared to $1 billion the year before.
Sales in Vietnam have also remained healthy at 950 units. Home sales have increased in Singapore, with 250 units sold in 2019 compared to 160 units in 2018. We have seen an increase in units sold at Keppel Bay following the announcements on the development of the Greater Southern Waterfront. We plan to launch 19 Nassim later this year, and we'll also consider launching Plot 4 at Keppel Bay, taking into account market conditions. Our total residential land bank stands at about 45,200 homes, with some 17,400 homes in key Asian cities which will be launch-ready from 2020 to 2022.
In our commercial portfolio, Keppel Land has about 1.6 million square meters of GFA, of which about half is under development. We expect to recognize revenue from the sale of some 8,720 overseas homes worth a total of about $3.9 billion upon completion and handover from 2020 to 2022. Looking ahead, we will seek to turn our assets faster in order to achieve the target ROE of 12% for Keppel Land.
Our Infrastructure division achieved stable net profit at $169 million for financial year 2019. Keppel Infrastructure continued to grow as a steady contributor to the group's earnings, with net profit improving from $117 million for financial year 2018 to $133 million for financial year 2019 due to improved performance from energy infrastructure and environmental infrastructure.
Keppel Marina East Desalination Plant is close to completion and is currently undergoing testing and commissioning. It is scheduled to commence operations in first half 2020 and will start contributing to the earnings of Infrastructure Services.
The Hong Kong Integrated Waste Management Facility is progressing well and has been making meaningful contributions to our bottom line. In 2019, Keppel Infrastructure entered new markets and invested in technologies which expanded our capabilities as a solution provider for sustainable urbanization. We invested in the MET Group, an integrated European energy company; and Zerowaste Asia, which provides environmental solutions in industrial waste and wastewater treatment.
The Data Centre business is an important growth engine for Keppel. Earnings from our Data Centre business are lower at $67 million in financial year 2019 compared to $76 million in financial year 2018 due mainly to the absence of gain arising from the sale of a stake in Keppel DC REIT in 2018. During the year, Alpha DC Fund and Keppel Data Centres divested Keppel DC Singapore 4 to Keppel DC REIT, with SGP 4 contributing $50 million in revaluation and divestment gains.
We'll continue to earn recurring income from the operation and maintenance of the Data Centre as well as asset management fees. This is a good example of how the Keppel Group creates value and earns different income streams through the life cycles of the assets we build, operate, maintain and manage.
Our Investments division made a net profit of $11 million, an improvement over the $54 million loss sustained in financial year 2018, despite our share of losses in KrisEnergy.
Our asset management business has performed well. Keppel Capital's net profit grew to $74 million in financial year 2019 compared to $62 million a year earlier. Its AUM has also grown by 14% from $29 billion to $33 billion as at end 2019. In 2019, Keppel Capital completed about $8.4 billion in acquisitions and divestments, and raised equity and debt of $9.5 billion. 2019 also saw Keppel Capital expanding its asset classes with a joint debt mezzanine platform together with Pierfront Capital.
Following strong interest from investors, Keppel Capital will soon launch a new Keppel Asia Infrastructure Fund to seize opportunities in the fast-growing energy and sustainable infrastructure sectors. A major milestone last year was the privatization of M1, which contributed a total of $153 million to the group's earnings for financial year 2019, including a remeasurement gain from the previously held interest in M1 and after taking into account charges related to the acquisition.
We're driving M1's transformation to enhance its competitiveness and contributions to the group. During the year, despite a challenging competitive landscape, M1 grew its postpaid customer base by about 11% to about 1.5 million compared to 1.384 million as at end 2018. In the past 6 months, M1 has been making significant headways in 5G developments, including embarking on 5G research and trials with universities in Singapore and working with Singapore government agencies and other partners to co-develop use cases to deliver the full potential of 5G technology.
Earlier today, we announced that M1 and StarHub have signed an exclusive agreement to cooperate and submit a joint bid for a 5G license. Over in China, the Sino-Singapore Tianjin Eco-City continues to grow steadily. Our joint venture master developer, SSTEC, continues to actively drive the city's development, including selling 2 land plots for about RMB 1.5 billion in 2019. This reflects the continuing demand for homes in Eco-City where over 4,000 homes were sold in 2019.
As we start a new decade, we have also begun planning our growth trajectory to 2030. In the first half of 2019, we gathered a group of younger Keppel business leaders to paint their visions for the company in 2030. Many interesting ideas have been surfaced, and we'll take onboard as we chart the company's vision 2030 with interim targets for 2025. More will be shared on our vision 2030 later this year, but it is quite clear that we see Keppel growing as one integrated business, providing solutions for sustainable urbanization.
Through our integrated business model, we'll seek to create value across the group and improve both the magnitude and quality of earnings while enhancing returns through active capital recycling. We will also endeavor to narrow the gap between our share price and the value of our underlying businesses by further deepening collaboration and tapping the synergies of the group. We will further strengthen our commitment to sustainability and combating climate change, including introducing an internal carbon price in the evaluation of all major investment decisions and enhancing our climate risk assessment.
Last October, Temasek announced a voluntary preconditional partial offer to acquire an additional 30.55% of shares in Keppel Corporation. If successful, the partial offer will result in Temasek and the offerer owning an aggregate 51% of Keppel. We are unable to comment on the preconditional partial offer, but we hold a view that there's long-term value in Keppel's businesses, a view which Temasek shares. We will, as always, work hard to deliver value to all our shareholders.
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 everybody. I shall now take you through the group's financial performance.
In the fourth quarter of 2019, the group recorded a net profit of $192 million, which was 42% higher the same quarter in 2018. Correspondingly, the earnings per share increased by 40% to $0.105 in this quarter. The group's revenue for the fourth quarter was 31% or $521 million, higher than same quarter in the preceding year. All divisions, except for Property division, registered higher revenues during the quarter.
Operating profit improved by $206 million, largely due to lower impairment provisions, higher fair value gains on investment properties and consolidation of M1 results.
Profit before tax at $238 million increased by a small extent as compared to the increase for operating profit due mainly to lower share of profits from associated companies. After tax and noncontrolling interest, net profit was 42% or $57 million higher at $192 million, translating earnings per share of $0.105. In the next slide, we take a closer look at the group's revenues by division. In the fourth quarter of 2019, the group's revenue at $2.2 billion was 31% higher than the same quarter in the preceding year. Revenue from the Offshore & Marine division increased by 49% to $775 million, mainly attributable to higher revenue recognition from ongoing projects such as the Awilco semisubmersible rigs and the Golar Gimi FLNG.
The Property division saw a 13% decline in revenue, mainly due to the absence of units handed over compared to the same quarter in 2018 from trading projects in Vietnam, such as Estella Heights in Ho Chi Minh City and, from China, Seasons Residences in Shanghai as well as lower number of units handed over at Waterfront Residences in Wuxi.
Infrastructure division saw a 2% growth in revenue as a result of higher progressive revenue recognition from the Hong Kong Integrated Waste Management Facility project. Revenue from the Investment division increased by $300 million to $340 million, largely due to the consolidation of M1's revenues and higher revenue from the asset management business.
Moving on to the group's pretax profit. The group recorded $238 million of pretax profit for the fourth quarter of 2019, 44% higher than the same quarter in the preceding year. The Offshore & Marine division registered a lower pretax loss of $37 million compared to the $97 million loss in the fourth quarter of 2018. This was mainly due to the higher operating results arising from higher revenue and lower impairment provisions, partly offset by share of losses from associated companies and absence of write-back of provision for claims as compared to 2018.
The Property division's pretax profit increased by $26 million to $242 million, due mainly to higher fair value gains on investment properties, higher profits from property trading projects in Singapore and higher investment income. This was partly offset by lower contribution from property trading projects in Vietnam and China as well as higher net interest expense.
The Infrastructure division's pretax profit of $25 million was 50% lower than the preceding year, mainly due to share of losses from associated companies against profits in 2018 as lower fair value gains were recognized from data centers as well as lower contribution from Infrastructure services, partly offset by higher contributions from Energy Infrastructure and Environmental Infrastructure.
Excluding the charges relating to the acquisition of M1, the Investments division registered a pretax profit of $16 million as compared to a pretax loss of $4 million in the preceding year. This was mainly due to higher contribution from the asset management business and consolidation of M1 results as well as lower provision for impairment of an associated company. These were partly offset by lower contribution from the Sino-Singapore Tianjin Eco-City and write-off of a receivable.
After tax and noncontrolling interest, the group's net profit increased by 42% to $192 million, with the Property division being the top contributor to the group's earnings followed by the Infrastructure division.
I shall now take you through the performance for the financial year 2019. Compared to the financial year 2018, net profit for 2019 was 25% lower at $707 million. Consequently, ROE decreased to 6.3%. Free cash outflow for the financial year 2019 was $653 million as compared to an inflow of $515 million in 2018, mainly due to higher working capital requirements with the construction progress of Offshore & Marine's major projects and Keppel Land's additional property development and land acquisition costs as well as lower proceeds from en-bloc sales.
Net gearing increased from 0.48 at the end of 2018 to 0.85 at the end of 2019. This was due mainly to borrowings drawn down for the acquisition of M1 and the privatization of Keppel Telecommunications & Transportation, higher working capital requirements, payment of the final dividend for 2018 and interim dividend for 2019 as well as the recognition of lease liabilities following the adoption of Singapore Financial Reporting Standard 16 on leases.
During the year, the group earned a total revenue of about $7.6 billion, an increase of 27% or $1.6 billion compared to 2018. All divisions registered higher revenues during 2019, except for a marginal decrease in the Property division.
Despite higher revenues, operating profit at $877 million was 17% or $178 million lower than in the preceding year. This was due mainly to lower gains from en-bloc sales of development projects and absence of gain from divestment of Beijing Aether as compared to 2018, partially offset by fair value gain from the remeasurement of previously held interest in M1 arising from the acquisition in 2019.
Profit before tax at $954 million decreased by a higher percentage of 23% due mainly to higher net interest expense as a result of higher borrowings and the adoption of Singapore Financial Reporting Standard 16 on leases as well as lower share of profits from associated companies, partly offset by higher investment income. After tax and noncontrolling interest, net profit at $707 million was 25% or $241 million lower, translating to earnings per share of $0.389. In the next slide, we take a closer look at the group's revenues by division. For 2019, the group earned total revenues of about $7.6 billion, 27% higher than the preceding year. The Offshore & Marine division recorded an increase in revenue of $345 million due mainly to higher revenue recognition from ongoing projects, partly offset by the absence of revenue recognized from the sale of jackup rigs to Borr Drilling as compared to 2018.
The Property division's revenues decreased marginally by $4 million compared to last year, mainly due to the absence of revenue from Highline Residences, which was fully sold by the first quarter of 2018, partly offset by higher revenue from China trading projects.
Infrastructure division saw an 11% growth in revenue as a result of increased sales in the power and gas business as well as progressive revenue recognition from the Keppel Marina East Desalination Plant project and the Hong Kong Integrated Waste Management Facility project. Revenue from the Investment division increased by $976 million to $1.1 billion largely due to the consolidation of M1's revenues and higher revenue from the asset management business.
Moving on to the group's pretax profit. The group recorded $954 million of pretax profit for 2019, 23% lower than the prior year. The Offshore & Marine division's pretax loss was $24 million as compared to a higher pretax loss of $113 million in 2018. This was mainly due to higher operating results arising from higher revenue, lower impairment provisions and lower net interest expense, partly offset by share of losses of associated companies and the absence of write-back of provision for claims as compared to 2018.
The Property division's pretax profit was 41% lower at $707 million due mainly to lower gains from en-bloc sales of development projects and absence of gain from the divestment of Beijing Aether as mentioned earlier. These were partly offset by higher contributions from property trading projects in China, higher investment income, higher fair value gains on investment properties and higher contribution from associated companies.
The Infrastructure division's pretax profit of $188 million was marginally higher than prior year's profit of $184 million, due mainly to higher fair value gains on data centers and higher contributions from Energy Infrastructure and Environmental Infrastructure, partly offset by lower contributions from Infrastructure Services and the logistics business as well as the absence of gain arising from the sale of a stake in Keppel DC REIT as compared to 2018.
Excluding the charges relating to the acquisition of M1, the Investments division registered a pretax profit of $136 million as compared to a pretax loss of $19 million in the preceding year. This was mainly due to fair value gain from the remeasurement of previously held interest in M1 arising from the acquisition, higher contribution from asset management business as well as the consolidation of M1 results and lower provision for impairment of an associated company. These were partly offset by lower share of profits from the Sino-Singapore Tianjin Eco-City, higher interest expense, higher fair value loss on KrisEnergy warrants and write-off of receivable.
After tax and noncontrolling interests, the group's net profit decreased by 25% to $707 million. All divisions are profitable this year, with Property Division being the top contributor to the group's earnings followed by Infrastructure, Investments and Offshore & Marine divisions.
The group's net profit of $707 million for the financial year 2019 translated to earnings per share of $0.389. ROE decreased to 6.3% in 2019 from 8.4% in 2018. Our proposed final dividend for our shareholders for 2019 will be $0.12 per share. Including the interim dividend paid, the total distribution for 2019 will be $0.20 per share.
Cash flow from operations was $994 million as compared to $561 million in 2018. After accounting for working capital changes, interest and tax, net cash flow from operating activities of $825 million as compared to an inflow of $125 million in the prior year, due mainly to increase in working capital requirements with the construction progress of Keppel Offshore & Marine's major projects such as the Awilco semis, Borr jackup rigs and Golar Gimi FLNG vessel as well as Keppel Land's additional property development cost and acquisition cost of a land plot in Tianjin.
Net cash generated from investing activities was $172 million, comprising divestment proceeds and dividend income from associated companies totaling $413 million, and net advances from associated companies of $97 million, partly offset by investments and operational capital expenditure of $338 million.
Net cash generated from investing activities in 2018 was higher at $390 million, largely due to cash inflow from en-bloc sales in China and Vietnam. As a result, there was an overall free cash outflow of $653 million for 2019 as compared to an inflow of $515 million in 2018.
With that, we come to the end of the presentation, and I shall hand the time back to our CEO, Chin Hua, for the Q&A section.
Thank you, Hon Chew. So we'll now proceed to the Q&A session. We have an audience here at Keppel Bay Tower. We also have folks listening in over the web. So may I invite the first question from the floor, perhaps?
Yes. Ajay?
A few questions here, just specifically on the details of the P&L account. Just wanted to kind of walk through in terms of specifically, number one, what is the fair value gain in the fourth quarter on investment properties of $62.7 million? Similarly, if we could also just understand which impairment of associate companies is the $17.9 million. And lastly, the bad debts written off of $43 million as well as the doubtful debts of $18.4 million, any details on that as well, please.
Thank you. Okay. Hon Chew?
Okay. I believe you are referring to -- is it the fourth quarter or the full year?
Fourth quarter.
Fourth quarter, okay. So the fair value gain on investment properties, $62.6 million. There are a number of properties, including the Park Avenue Central in China and also Linglong Tiandi in Beijing as well. These are the 2 biggest contributors to the fair value gain in fourth quarter. Likewise, too, we have also the project in India, in Bangalore. They also contributed to the fair value gain in the fourth quarter. So it's made of, of a number of properties. It's not just a single property because, as you know, at the end of each financial year, we do a review of the valuation of other investment properties.
Your second question on impairment of associate, for the fourth quarter is largely due to KrisEnergy. We have since written down the equity value to 0. Thirdly, there is a bad debt write-off in fourth quarter of $43 million. That's largely relating to a loan to a customer for a rig that was delivered some years ago. So because the loan was in default, that vessel was sold and we have to do a write-off as of fourth quarter.
There's also the -- a provision for doubtful debts in the fourth quarter. That consists of a number of items again coming from a few divisions, including Keppel Infrastructure. I think one of the items arises from a fair value loss because of the time value of money. This has to do with the [ Qatar ] claims. So we expect to recover the amounts over a number of years. So that also contributed to the provision for doubtful debts for the fourth quarter.
Okay. Yes. There's a question at the back. I can't quite see. Ah, Gerald?
Gerald from Credit Suisse. The first question is on the Property division. Your ROE in 2019 was just about 6.5%, which is below your ROE target of 12%. What do you think how big the divestments in 2019 and what would change to allow you to be turning around your assets faster going forward?
Second question is on O&M. It's [ gone ] back to a loss in the fourth quarter. What drove the losses? And are you still confident of a sustained recovery given the weaker order in the fourth quarter? Last question is on M1. What do you expect the 5G CapEx would be and how will it funded?
Okay. Maybe I'll invite Swee Yiow, do you want to address the question on earning -- how we're going to earn the asset faster.
Well, I think, first of all, the 12% is over a period of time, not measured in a single year. So I think we have to look at the period of time. We had quite a sizable land bank buildup over the years. You can see that we have about 45,000 land banks or units. We also have some commercial space that -- in our land bank. So first of all, we will be actively activating all this land bank and our commercial space to generate returns. Of course, it will be also depending on the market conditions that we can do. But you can see that sometimes, in fact, we end up waiting for development by en-bloc sales that we have done in the past, we have managed to generate quite significant contributions.
I think just to add on to what Swee Yiow have said, it's very clear that for our Property division, we have been driven or we are driven by this 12% ROE. And as Swee Yiow said, this is a medium- to long-term target. We do have quite a lot of assets in our Property book and we just have to turn this asset faster. Selling -- as you said, selling through en-bloc sales is just another way of achieving a sale, we do not need to develop everything ourselves. So I think the goal is -- we're still very much guided and we believe that this 12% target for the Property division can be met.
On the second question on O&M quarter 4 and the outlook, maybe I'll just ask -- I'll split the question to 2. I'll ask Hon Chew to address the question on the fourth quarter on O&M, and then I'll ask Chris Ong to talk a bit about the prospect going forward.
Okay. Thanks, Gerald, for the question. In the fourth quarter, from the slides you can see, yes, in terms of profit before tax is at $37 million loss. But if you look at the operating profit, it's actually a positive $13 million. So the reason for the loss for the fourth quarter is actually because of share of losses in associated companies. In fourth quarter, in particular, Floatel had to do an impairment exercise on its vessels. So as a result, the KOM has to take its share of the impairment losses. So actually, the underlying business of KOM at operating level is profitable.
Okay. Maybe I'd take a question from the net...
[ How about ] Chris?
Sorry. Okay. Chris. Thank you.
Yes. Pertaining to the question whether we are optimistic [ during ] that is relatively a weak order win in the last quarter, during the last quarter, we did mention that the FIDs and some of the projects that we're chasing is not really dependent on the quarter-by-quarter. So -- and you can see that for the whole of 2019, the amount of order win was slightly above $2 billion, which is already 18% higher than a year previously. So if you look at the market, although the Offshore & Marine market is still challenged, but our diversification has got us a wider portfolio of products. So we will continue to chase value-add projects in 2020 and continue on a growth trajectory.
Yes. Okay. I don't want to shortchange Gerald. She had -- he had asked one more question on M1. So maybe if I could invite Manjot to address that question.
Thank you. Like Mr. Loh said in his speech, I think we've entered into an exclusive agreement with StarHub to bid jointly for the 5G spectrum. So at this point in time, we are unable to share any commercially sensitive information, so I won't be able to share the CapEx numbers that you've asked for.
Thank you. Then I'll address a question from the web. This question is from the Tay Peck Gek of SPH in Singapore, "Would the China coronavirus and the Hong Kong unrest impact Keppel Corp?" So far, we have not had any direct impact on Keppel Corp. We do have about 170 staff in Wuhan. And of course, we also have operations across China. We have advised our operations there and our staff there to take the necessary precautions. We are watching this very closely.
Any question from the floor? Yes, Siew Khee.
Just going back to the margin trend, I see that revenue for this quarter has been quite strong versus past few quarters. But is there anything special that we should be aware of? That your margin actually dipped, I hate to use the word, Q-on-Q, yes. But it did go down Q-on-Q in 4Q. Because it was about 5-ish last quarter, and in this quarter it came down to about less than 2.
You're referring to operating...
Operating margin for O&M.
O&M.
Yes. So was it sustainable? We should expect, as revenue go up, as you ramp up the work, your operating leverage should improve. Is there anything special that you did this quarter that hindered that progress?
Right. Do you want to [indiscernible]?
Well, as we have said before, we try not to look at quarter-on-quarter. As you know, the margin really also depends on the projects that are being worked on. So I think as we have [ already ] said, right, our objective is really to get Offshore & Marine back to profitability, and we have successfully done that in this year. We look forward to working to improve on O&M's performance in 2020.
And also back to KrisEnergy, did you say that you actually wrote down the investment to 0 value, so that means there won't be any potential provision even if there's any progress?
What we've said was we have written down the equity value, including also the warrants down to 0. We still have remaining 0 coupon bonds in our books. At the year-end, that amounts to about $74 million.
Yes. Cheryl?
Cheryl Lee from UBS. I have a few questions on the Offshore & Marine. So could you just help us also understand the intent to increase the headcount by another 1,500 even though order books have been quite sluggish, is this just based off work that you're expecting to complete based on your current order book or in anticipation of something that you might secure?
The other question is about the CapEx levels that we are seeing in Offshore & Marine. Are these maintenance levels that we can expect? Or do you expect some additional CapEx that is upcoming that we need to be aware of? And then thirdly, could you just also help us understand the -- why there's a -- there seems to be, I think, a positive tax impact in the fourth quarter for O&M.
I think the planned increase in workforce is due to the anticipated increase in workload. I think you can see that we have steadily been building up our net order book, and we anticipate that over the next few years we'll be executing on this net order book. So this is in anticipation of -- not anticipation, it is actually based on the workload that we currently have. Of course, we have high hopes. We hope that there will be even better, stronger orders this year. KOM is now working on quite a number of inquiries, so we'll see how those turns out. On CapEx level, I don't believe there's anything exceptional that you should expect from KOM. The last question on tax.
I think referring to the positive tax number, that's largely because of some write-backs that were made in the fourth quarter. In particular, there were some group relief that was recognized. As you know, in Singapore, among group companies, you can actually transfer tax losses between companies. So as a result, that is a tax credit that KOM actually recognized during the year. Apart from that, there are also some KOM entities that were able to do tax write-back because of certain expenses that are actually tax deductible, they were not recognized as such in the previous years.
Okay. Maybe I'll take this question from Reuters News, Mr. Aravindan. I hope I pronounced your name correctly.
First question, "Has Temasek discussed any potential consolidation of Keppel and Semcorp Marine with you?
No. The offer is still a conditional partial offer. There's no discussion. I think we're still -- we'll see -- we're still managing it as it goes.
Second question, "Are M1 -- is M1 and StarHub considering working with Huawei as a vendor to provide 5G if they are successful in their bid?" Maybe I can ask Manjot.
Yes. So as of now, I think all our energies are focused on making the joint bid and responding to the call for proposal by IMDA. I think this question is extremely premature at this point in time, so we won't be able to respond to it. Thank you.
Siew Khee, follow-up question.
Sorry, I'm not sure whether anybody has asked, but can you explain why is there a drop or why is there a loss in Infrastructure associates in this quarter?
Sorry, a loss in?
Share of results of associate companies in Infrastructure in 4Q.
Infrastructure. Okay. Of course, in the fourth quarter, as you know, we had to do a fair value evaluation, and so there are some data centers that actually saw some reduction in the fair value -- the fair valuation. Apart from that, yes, I think that's -- I think the main reason for the drop in the performance, yes.
I'm Adrian from UOB Kay Hian. I just wanted to follow up on one of Gerald's questions regarding Floatel. Will there be any more impairment losses on Floatel? And my second question relates to your renewables efforts. Last year, you won some decent-sized orders. Just wondering whether you can give us any color on what sort of margins you get on those projects versus, say, a semi-sub rig.
Okay. We don't make any forecasts on provisions. We look at the carrying value of all our assets every quarter. And we believe that what we have provided to date for all these assets are correct and this is checked by our Audit Committee as well as by the auditors. On the question on renewables, I think you are referring to the offshore renewable sector, the outlook. Maybe I can ask Chris Ong.
I think your question was to shed some light on the margin of the projects. We don't usually do that, but maybe share with you a little bit on where are the areas that we are actually looking at in terms of the offshore renewable business. From adjacency and capability and design, construction and procurement, we can see that we are able to reach out to customers in areas of offshore renewable energy, offshore wind market. We are able to do the support installation and also all the substation type of construction and design. So we are going full force out in the market to make sure that we are able to reach out to the potential customers.
Yes. [indiscernible]
I'm [indiscernible] from Macquarie. I just have a follow-up question on the losses at Floatel. I think one part you described it as the impairment, so I think it will be helpful to kind of like, if you can, tell us what the amount was. I think partly because the losses that you experienced in 4Q was due to an absence of work for all 5 of the Floatels for the quarter. And I think as we move into 2020, you actually have 2 of them going back to work. So I think it'd be helpful if you can kind of [ share your ] thinking of what those losses were so that we can think about how 2020 will be.
Yes. Yes, I think the underlying reason for the poor performance of Floatel is really because of the 5 vessels. We only have a couple of that, actually one at this point, that has a charter. So as a result, it has made a loss. So we have to then equity-account for our share of the loss. But because the vessels are off charter, of course, at the year-end, when we do the valuation, there will be an impact on the valuation. So as a result, they had to take an impairment which we also have to equity-account for our share, yes? So as a result, I think if you look at the share of associate line for Offshore & Marine, a large part is actually the share of loss from Floatel.
I understand that. All right. Yes. But I'm just wondering whether you could share with us the impairment amount so that we kind of like understand the magnitude of the losses from the low utilization. And a clarification, I thought you had 2 contracted for this year, not 1.
I think the results is because of what was operating last year. But your question that there's 2, yes, 2 of them are contracted, but that's for this year. So that's the distinction between your question.
Okay. To your earlier question, the share of the losses of Floatel in total is actually $51 million, of which $20 million relates to impairment.
Any further questions? Yes, Cheryl?
This is with regards to Infrastructure. So I can see that year-on-year, the net profit has been flat, but some of this is related to execution of projects, and I suppose some of this is recurring in nature. So as we understand, I think Marina East comes off as the project completes, and then it [ goes ] off in the recurring state, right? But I guess the -- the question actually really is how sustainable is this? I mean will the loss of project-related earnings be able to be compensated by recurring income? So do we expect earnings to be at least stable? Or do -- should we consider that it might decrease?
We actually report quite a few business units under the Infrastructure division. If you are referring to Keppel Infrastructure, which is building Marina East Desalination Plant, as I said in my speech, actually, the performance of KI has been stronger this year compared to last year -- or this year, as in 2019, compared to 2018. Whilst the Marina East Desalination Plant is coming to an -- the construction is coming to an end, we will have, as you said, O&M fees. But the Hong Kong project is going into -- and we're just only starting to recognize that, yes. Anything else do you [ want to add? ]
I don't think we are expecting a drop. We are very optimistic about our prospects for next year.
This year.
This year.
Okay. We have a question now from the web. It's sent in by Jason Yeo of Goldman Sachs in Singapore. He has 3 questions, so maybe we take it one at a time. "Can you share your plans for the redevelopment of Keppel Towers?" Maybe I'll ask Swee Yiow if you could address that.
Okay. We had submitted our recent proposals and in consultations with various authorities on the proposal. So once we have obtained the approval, we will share more information.
Second question from Jason is for O&M. His question, "Is the pipeline of O&M tenders or inquiries stronger this year versus last year?" Chris, you want to do it?
I think what we can see is that there's a strong pipeline of inquiries in place compared to last year or 2 years back. I think we're seeing a more stronger pipeline of inquiries. But it's also sector dependent, so it depends on FID timing, different projects coming online. But we are actively engaged in all of them.
Third question is for, I suppose, for Christina. His question is, "Can you share the time line, target size and SIP assets for the Keppel Asia Infrastructure Fund?
Okay. Thanks, Chin Hua. Jason, with regards to the Keppel Asia Infrastructure Fund, we are looking to launch USD 1 billion in terms of target equity size. This will probably attract a lot of quality institutional investors, especially the sovereign wealth funds, because the first [ seat ] asset that we're looking to put into the fund will be on project Gimi. So on the strength of the capital group leveraging on Keppel's capabilities, we are able to actually provide a good pipeline of deal flow projects for this fund. In terms of time line, we'll be announcing the first closing quite soon. So when it's done, we will actually do a press announcement.
Any questions? Any more questions from the floor? Any last takers? Last question? No? Okay. Thank you very much for attending.