January 20, 2012

Keppel Land

OCBC Research on 20 Jan 2012

As anticipated, Keppel Land (KPLD) announced a rich dividend of S$0.20 (7.8% yield on yesterday’s closing price) which would likely be a positive catalyst for the share price in the near term. FY11 PATMI of S$1,366m increased 29.7% YoY mainly due to OFC divestment gains and fair value gains on investment properties. Adjusting for one-time items, we estimate core PATMI at S$279.6m, which was 6% higher than our full year forecast. Maintain BUY with a higher fair value estimate of S$3.32 (35% RNAV discount) versus S$3.21 previously, mainly due to higher prices for K-REIT holdings and realized fair value gains. Including a cash dividend of S$0.20 (book closing - 26 Apr 12), this implies a total 12m return of 37%. 

FY11 results within expectations
As anticipated, Keppel Land (KPLD) announced a rich dividend of S$0.20 (7.8% yield on yesterday’s closing price) which would likely be a positive catalyst for the share price in the near term. FY11 PATMI of S$1,366m (S$0.93 EPS) increased 29.7% YoY mainly due to a S$508m gain from the OFC divestment and S$550m of fair value gains on investment properties. Adjusting for one-time items, we estimate core PATMI at S$279.6m, which was 6% higher than our full year forecast of S$262.6m. Top-line of S$949.0m was 3% lower than our S$977.0m forecast.

Residential segment to face more headwinds
KPLD sold 480 homes in FY11, versus 650 in FY10, with a total sales value of S$729m. In China, we observed a similar slowdown in residential sales in FY11 as KPLD sold ~1,400 units – significantly lower than the 4,100 units sold in FY10. We believe governmental curbs in these two main markets have had significant impact on sales and we expect to see a continued slowdown in the pace of sales over 1H12 at least.

Acquired new commercial site in Beijing
Management also announced yesterday that it had paid S$168m for a 51% stake in a commercial site in Beijing’s CBD between the eastern second and third ring roads. It has a GFA of ~100k sqm and is planned for a development with three office block and retail premises. Management has indicated that they expect rental yields to be ~6-7%, which we feel is realistic. However, given the purchase price, we are fairly neutral about the acquisition and assign no accretion to RNAV at this juncture.

Maintain BUY 
Maintain BUY with a higher fair value estimate of S$3.32 (35% RNAV discount) versus S$3.21 previously, mainly due to higher prices for K-REIT holdings and realized fair value gains. Including a cash dividend of S$0.20 (book closing - 26 Apr 12), this implies a total 12m return of 37%.

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