Keppel Land

OCBC on 19 Apr 2012

Keppel Land (KPLD) reported 1Q12 PATMI of S$141.9m, up 70% YoY, mostly due to a bumper contribution from Reflections at Keppel after the handover of DPS units. 1Q12 topline was S$170m, down 52% YoY as property trading revenues fell. We judge 1Q12 PATMI (making up 38% of our annual forecast) to be mostly within expectations, given “lumpier” earnings post adoption of INT FRS 115. Grade A office rents fell 3.6% to S$10.60 in 1Q12. Given residual macro risks, we believe it is too early to call a bottom for the domestic office sector - a key driver for KPLD’s share price. This risk is balanced out, however, by potential RNAV accretion given ample capital (16% net gearing) and sufficiently attractive valuations. Maintain HOLD with an unchanged fair value estimate of S$3.32 (35% discount to RNAV).

1Q12 results mostly within expectations
Keppel Land (KPLD) reported 1Q12 PATMI of S$141.9m, up 70% YoY, mostly due to a bumper contribution from Reflections at Keppel after the handover of DPS units. 1Q12 topline was S$170m, down 52% YoY as property trading revenues fell. We judge 1Q12 PATMI (making up 38% of our annual forecast) to be mostly within expectations. As guided previously, we expected ‘lumpier” earnings post adoption of INT FRS 115 whereby profits on overseas projects and sales under DPS are recognized only on full completion.

Residential sales in China stay subdued
In overseas markets, 270 units were sold in 1Q12, of which 190 units were in China (Botanica Township (Ph 6) in Chengdu and the Springdale in Shanghai). This is only somewhat higher than the 150 Chinese units sold in 1Q11, which reflects persistently difficult conditions in China, in our view, as the central government continues property curbs. In Singapore, KPLD sold over 90 homes in 1Q12 mostly at the Luxurie which brings it to ~52% sold. Management also indicated that they would set aside 150 units at the Reflections for leasing.

MBFC Phase 2 up to 67% committed
MBFC Phase 2 (T3) is currently 67% committed having signed on new tenants Rio Tinto (46k sq ft), Fitness First (16k sq ft) and Regus (13k sq ft). In Vietnam, KPLD secured a key anchor tenant, Takashimaya, for Saigon Centre Phase 2 (Ho Chi Minh City) ahead of its completion in 2015.

Maintain HOLD
Grade A office rents fell 3.6% to S$10.60 psf in 1Q12. Given residual macro risks, we believe it is too early to call a bottom for the domestic office sector - a key driver for KPLD’s share price. This risk is balanced out, however, by potential RNAV accretion given ample capital (16% net gearing) and sufficiently attractive valuations. Maintain HOLD with an unchanged fair value estimate of S$3.32 (35% discount to RNAV).