Keppel Land

Keppel Land: Announced a pretty decent set of 2Q12 results which was in-line with estimates. Revenue at $330.5m (+154% y/y, +60% q/q) while net profit at $95.5m (+1% y/y, -1% q/q). The robust top-line was primarily driven by increased revenue from the group’s Property Trading segment which was buoyed by higher revenue recognition from The Lakefront Residences and The Luxurie in Singapore, The Springdale in Shanghai and the new revenue stream from Phases 4 and 5 of 8 Park Avenue in Shanghai which were launched in Jun13. During quarter, sales momentum accelerated in both S’pore and China and as of 1H13, Keppel Land has sold 210 units in S’pore valued at $527m driven by strong demand for Corals, while in China the group has sold 1,940 units valued at RMB2.4b. The group also registered higher contributions from its Property Investment segment on back of higher rental yields from Keppel REIT and Marina Bay Financial Centre (MBFC) Tower 3, together with improved contributions from the Hotels and Resorts and Others segments. These increases were however partly reduced by lower contributions from Reflections at Keppel Bay and the group’s Fund Management segment. Despite MBFC Tower 3 reaching an ~90% committed occupancy, although management highlight that there is currently no rush to recycle capital by divesting its 1/3 stake to Keppel REIT, given the group’s net gearing is a comfortable 0.4x with a healthy cash position of $1b. as such, we opine that the possible divestment now appears more likely to happen in FY14 rather than FY13. Going forward, Maybank-KE reiterates Keppel Land as one of its top property picks, as the house continues to favour KepLand’s diversified business and undemanding valuations. Positive catalysts include further tie-ups with China Vanke in China and the eventual monetization of MBFC Tower 3. At current price, valuations are undemanding, with the group trading at just 0.9x P/B and 0.6x P/RNAV. Latest broker ratings as follows: Maybank-KE maintains Buy with $4.80 TP CIMB maintains O/p with $4.00 TP Credit Suisse maintains neutral with $4.10 TP Deutsche maintains Buy with $4.34 TP Nomura maintains Buy with $4.75 TP OCBC maintains Buy with $4.09 TP StandChart upgrade to O/p with $4.06 TP UOB Kay Hian maintains Buy with $5.11 TP