Keppel Land

UOBKayhian on 26 Jan 2015

FY15F PE (x): 12.3
FY16F PE (x): 11.0

Keppel Land privatisation offer. Keppel Corp (Keppel) has made a cash offer to privatise Keppel Land (KepLand) in a 2-tier approach: a) Base offer price of S$4.38/share (20% upside to last done of S$3.65) is at KepLand’s P/B of 0.88x and an 18.4% discount to KepLand’s RNAV of S$5.37. b) Higher offer price of S$4.60/share, to be paid of Keppel is entitled to exercise its rights of compulsory acquisition (with 90% shares held by the offeror. The higher offer price (26% upside to last done of S$3.65) is at a P/B of 0.93x and a 14.3% discount to RNAV of S$5.37. We recommend taking up the offer since even the base offer price (S$4.38/share) is above our target of S$4.30/share. However, long-term investors are likely to hold out for a higher offer price as the offer is at a 7-12% discount to the book value. The offer is inclusive of the 14 S cents per share dividend declared in the 4Q14 results. The final tender date has yet to be decided. Maintain BUY and target price of S$4.30, pegged at 20% discount to our RNAV of S$5.37/share. Key catalysts include acquisitions, divestment of its office assets and sustained recovery in China sales.