Driven by Singapore residential
Keppel Land reported a 3.8x jump in net profit to $778.7m, lifted by sizeable exceptional gains and revaluation surplus of $534.2m. Otherwise, bottomline would have been a more modest but still strong $391m, reflecting the strength in Singapore residential contributions. Looking ahead, the good earnings momentum is likely to continue with progressive billings from presold projects as well as new launches such as Marina Bay Suites while its low gearing would enable the group to recycle its capital.Our price target is lowered to $8.24 and is based on parity to RNAV. Maintain Buy.
Results boosted by one-time gains. Keppel Land reported FY07 net profit of $779.7m, up 289% yoy. The results were boosted by net exceptional gains of $534.2m from the sale of one third share of ORQand $388.2m of revaluation surplus, offset by impairment provision ($78.2m). Excluding this, net profit would have been a more modest but still strong $391m. The better operating performance was derived from residential development activities, largely in Singapore. Net profits from local operations accounted for 60% of bottomline (vs 60% previously) and the remaining came from overseas operations. The group has declared a total DPS of 20cts comprising 8cts ordinary and 12cts special dividend.
Residential the star performer. Residential EBIT rose 59% yoy to $300.8m with greater contributions from Reflections at Keppel Bay, Marina Bay Residences and Sixth Ave as well as writeback of $109m cost provision from Parc Infinia, Freesia Woods and Tresor. To date, the group had sold 760 units in FY07. Overseas contributions came from ongoing projects in China, India and Vietnam.
Recycling of capital in place. Going forward, we anticipate the strong momentum is Singapore residential profits to continue as the group progressively recognizes proceeds from earlier sold projects. It also plans to launch Marina Bay Suites in 1Q08. Following the divestment of its share of ORQ, gearing has declined to 0.41x. While part of the proceeds could be used to fund its share of K-reit’s rights issue, the group is in a good position to recycle its capital via overseas investments in Vietnam, China and Middle East. Meanwhile, its aggressive overseas strategy has enabled the group to build a sizeable development pipeline in China, Vietnam and India as well as make inroads in the Middle East.
Maintain Buy. Following the recent share price dip, the stock is trading at a 21% discount to its RNAV of $8.24. Our price target of $8.24 is based on parity to asset backing.
Major Shareholder: Keppel Corp 52.7%
Posts
No comments:
Post a Comment