Friday 19 April 2013

Keppel Land

OCBC on 18 Apr 2013

Keppel Land’s (KPLD) 1Q13 PATMI came in at S$96.6m – down 32% YoY mostly due to the absence of contributions from Reflections at Keppel Bay. KPLD also reported that it would join China Vanke (Vanke) in a strategic alliance to develop property in China and Singapore. As a start, Vanke would take a 30% interest in KPLD’s Tanah Merah GLS site for S$135.5m. All considered, we believe this price is reasonable and see the limited loss of accretion to KPLD’s RNAV mostly offset by the potential synergies from this alliance and further asset diversification in an increasingly uncertain domestic residential space. Maintain BUY with an unchanged fair value estimate of S$4.53 (25% discount to RNAV).

1Q13 numbers mostly within expectations
Keppel Land’s (KPLD) 1Q13 PATMI came in at S$96.6m – down 32% YoY mostly due to the absence of JV contributions from Reflections at Keppel Bay which also resulted in a 57% dip in property trading profits to S$56.9m. 1Q13 PATMI now forms 21% of our FY13 estimate which we judge to be mostly in line with expectations. 1Q13 topline is S$207.0m, which increased 22% YoY due to higher progressive recognition from property developments and again judged to be mostly within expectations.

Strategic alliance with China Vanke
KPLD announced that it would join China Vanke (Vanke) in a strategic alliance to develop property in China and Singapore. As a start, Vanke would take a 30% interest in KPLD’s Tanah Merah GLS site for S$135.5m. Recall that KPLD had won this site with a S$434.6m bid last Oct and Vanke’s entry price is only marginally above that of KPLD’s cost. All considered, we believe this price is reasonable and see this alliance as a positive development. In our view, the limited loss of accretion to KPLD’s RNAV from this divestment is mostly offset by the likely synergies from this alliance and further asset diversification in an increasingly uncertain domestic residential space. 

Launches ahead at Keppel Bay and Tanah Merah
Looking ahead, new launches in Singapore are Corals at Keppel Bay and the Tanah Merah development and in China, Seasons Residences in Shanghai, Waterfront Residence in Nantong and Park Avenue Heights and Hill Crest Villa in Chengdu. In addition, KPLD reports that the MBFC T3 is about 86% committed with the retail component fully leased.

Maintain BUY
We continue to like KPLD for its strong balance sheet (S$1.1b cash, 31% net gearing), diversified exposure and the potential divestment gains from MBFC T3 as the asset stabilizes. Maintain BUY with an unchanged fair value estimate of S$4.53 (25% discount to RNAV).

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