Keppel Land

Keppel Land: Announced that it has agreed to acquire Lifehub @ Jinqiao, a mixed use retail and office development in Shanghai. Plans to acquire a 42.5% stake in Equity Rainbow II (from a Morgan Stanley Fund), which holds an 80% stake in the mall for US$126.5m (S$157m) with Alpha acquiring the balance. Notably, this marks the first time that Keppel Land has partnered with Alpha in the acquisition of an asset, marking a departure from its previous transactions. Deutsche note that mgt had previously flagged that it was looking to acquire mixed use developments in China while deepening its presence in gateway cities such as Shanghai, Beijing, Wuxi, Chengdu and Tianjin. Together with the recent office acquisition in Beijing, this purchase further enhances Keppel Land’s commercial presence in China. Recall that following the divestment of Ocean Financial Centre, Keppel Land’s net gearing had fallen to 0.22x, providing additional capital for acquisitions. At RMB 20,244psm GFA, the acquisition is at the midpoint of recent transactions of RMB 16,000-25,000 PSM completed in the area. Given the strong tenant roll, believe that the acquisition appears attractive and note that it is on lower end of previously published indicative asking prices of RMB 26,000-30,000 PSM. Co. state that the acquisition will not have a material impact on EPS. Deutsche maintains O/p with $4.36 TP. Estimates remain unchanged pending further disclosures on the operating performance and growth potential for the asset.