Keppel Land

Keppel Land: Announced 2Q11 results which were below expectations.
Rev at $104.2m, -67.2% yoy and -70.9% qoq, while net profit at $50.5m, -64.9% yoy and -45.1% qoq. Weaker then expected results were dragged by accounting changes for offshore earnings, which was adopted for SG dev projects.

Earnings also impacted as there were 4 overseas projects completed in 1H10 versus 1 in 1H11, overseas earnings only accounted for 9.2% of grp net profits. Without accounting change, 1H11 net profit would have been +22.6% to $165m, about 20% ahead of street estimates. Fund mgt was the bight spot, as AUM reached $11.3b and was the star performer in 1H11 with net profit rising 52.2% yoy to $23.9m, accounting for 18% of group net profit.

We note at current price, grp trades at a 1.21x FY11E P/B, vs Capitaland (0.8x P/B) and CityDev (1.4x P/B), while Leverage stood at an acceptable 38%, with a health interest cover of 6.7x, suggesting further headroom for debt. While average RNAV estimates stand at approximately $5.30-$5.50), suggesting that valuations are compelling.

Going forward, grp remains positive on prospects, noting that sequential pick-up in China sales (250 sold in 2Q vs. 150 in 1Q) and firm take-up in Vietnam was encouraging. Office pre-commitments unchanged qoq reflecting slowdown in leasing activity. BNP Paribas maintains Buy with $4.60 TP, Macquarie maintains O/P with $4.81 TP, Deutsche maintains Buy with $5.30 TP, UBS Maintain Buy at $5.08 TP and SCB maintains In-Line rating at $4.03 TP and Citi Reiterate Sell at $3.50 TP.