Keppel Group

Keppel Group: CLSA expect group's 3Q13 numbers to be in line with consensus expectations. House remain bullish on Keppel Land (Buy with TP $4.76) and Keppel Corp (Outperform with TP $12.00) but maintain SELL on Keppel REIT (TP $1.30) due to equity raising overhang. Keppel Corp's topline is expected at around $3-3.2b, with net profit of $360-380m. O&M EBIT margin should be stable q/q at ~14%, while Infra segment is expected to see a big y/y jump in profit driven by improvement in Doha and full contribution from co-gen plant. Gearing and FCF are likely to see further improvement, due to deconsolidation of REIT and jackup deliveries. For Keppel Land, healthy sales at Corals and the recent launched “The Glades” will underpin earnings from FY14. Recent visits suggest Keppel Land’s “The Glades” sold well with about 100 units (726 total) transacted at $1,400-$1,500 psf over the first two weekends. Meanwhile, supportive China residential sales data among peers should translate into decent sales momentum for 2H13. On Keppel REIT, CLSA expect in-line earnings after Grade A office rents have bottomed and showing slight growth according to various property consultants. Marginal upside can come from occupancy improvement for OFC which is currently at 97.9%. KREIT has been actively refinancing its debt ahead of maturity to hedge against rising interest rates.