Keppel Land: 3Q11 results 30% below consensus, and in line with lower range of estimates.
Net profit came in at $58m, +15% qoq, boosted by investment income (+48% yoy) as KPLD received higher dividends from its invmts in Alpha Invmt Partners, and greater contribution from booking of revenue from Spore trading projects (mainly Reflections @ Keppel Bay, Madison Residences, as well as The Lakefront Residences).
Home sales in Spore and China townships were stronger in 3Q compared with 1H. for instance, in 3Q KPLD sold 260 homes in the Luxurie in Spore, vs 160 units achieved in 1H. Also take up of township homes in China came in at 780 units in 3Q, vs 400 units in 1H, with most units being sold in The Botanica in Chengdu, The Seasons in Shenyang, and The Springdale in Shanghai.
With the divestment of Ocean Financial Centre (OFC), StanChart expects net debt/ equity to reach 10% by end 2011, leaving KPLD with sufficient headroom ($2b before reaching 50% gearing) to invest in sites for more residential, township devt projects.
The Street cuts FY12 EPS estimates for KPLD, adjusting forecasts to incorporate slower completion of projects in china and Vietnam, new land acquisitions in Shanghai, Wuxi and the loss of rental income from OFC in 2012.
StanChart keeps Inline rating and TP $2.86, set at 0.65x P/RNAV. But notes in 2002-04, when Spore residential prices were on a gradual downtrend, KPLD traded at 0.5x P/NAV, implying KPLD could trade to $1.80/sh if such an environment were to be revisited.
Citi maintains Neutral with TP $2.88.