OFC booster to muted FY11 results: Keppel Land announced FY11 results with a huge booster of one-time gains totalling $1.086 billion mainly from the divestment of Ocean Financial Centre (OFC) and its attributed revaluation surplus, as well as partly from Marina Bay Financial Centre (MBFC) Phase 2 and K-Reit. The results are slightly ahead of expectations, with net profit excluding exceptional gains of $279.7 million at minus 0.6 per cent y-o-y slightly above our expectation of $253.3 million. We have a 'buy' recommendation on Keppel Land, TP of $3.53.
Bumper dividend slightly above expectations: We previously highlighted the possibility of a special dividend for FY11 post-divestment of OFC should capital deployment opportunities remain protracted. Along with FY11 results, total dividend of 20 cents per share (ex-dividend April 26; 7.8 per cent yield) has been proposed which is slightly ahead of our expectations of 18 cents per share.
Near-term focus on commercial segment, Beijing acquisition announced: Post-divestment of OFC, the current balance sheet is healthy at about 0.1x gearing. We gather takeaways from management comments along with the FY11 results and believe KepLand's near-term focus for capital deployment lies in the commercial segment given policy overhang in both Singapore and China markets.
Along with FY11 results, KepLand announced the acquisition of a 51 per cent stake in a Beijing commercial site (2.6ha, GFA 100,000 sq m; completion end-2014) which is expected to be developed into three office blocks and retail premises in the Chaoyang district. This may allay some possible market concerns on uncertainty regarding KepLand's currently evolving business model.
Maintain 'buy', TP $3.53: We reduce TP to $3.53 after factoring in a lower consensus TP for K-Reit, partly mitigated by higher asset under management for its fund management arm Alpha Investment Partners with first closing of Alpha Asia Macro Trends Fund (AAMTF) II. Maintain 'buy' on account of
BUY
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