Keppel Land

Keppel Land: 4Q/FY12 results above expectations. 4Q12 net profit halved from a year earlier to $527.3m, mainly due to the absence of one-off gains. However, core profit (before divestment and revaluation gains) was $157.1m, +40% yoy. Full year net profit was 39% lower at $838.37m. But without the divestment and revaluation gains, net profit was up 61.4% to $451.5m. The results beat was due to better than expected associate contribution (+114% yoy led by K-REIT) and higher profit recognition at Reflections, and Marina Bay Suites. Singapore property sales remained at ~120 units in 4Q (mostly at The Luxurie), and ~430 homes for the full year. China sales in FY12 rose to 1,650 units led by The Springdale, Central Park City and The Botanica. Mgt will monitor the mkt closely for a window to launch the Tanah Merah project and Keppel Bay Plot 3. In China, the group has over 2,000 launch-ready units, and targets to launch ~5,200 units p.a. in China over the next 3 yrs. KPLD plans to review residential launches in Singapore in the light of the Govt’s recent round of extensive property cooling measures, while also noting that it expects 2013 to be another challenging year. Says it is not going to rush into launching new projects in the coming months, but will instead adopt a wait-and-see approach, before making its next move. CEO Ang Wee Gee adds, "we see prices perhaps consolidating. But we don't see a major correction. But neither do we see the price spiking further because the government will introduce further measures to dampen it… upside possibility is not high, but the downside risk may not be that high as well." Following the divestment of Ocean Financial Centre, the co has $1.6b in cash, placing it in a strong financial position to capitalise on the current uncertain business climate to acquire attractive projects in the region. KPLD proposed a final dividend of 12 cts/sh (~3% yield), which although lower than FY11’s 20ct/sh div, came in above expectations. Deutsche maintains Buy with TP $4.36 (from $4.04), pegged to 20% discount to RNAV. Maybank KE keeps at Buy, lifts TP slightly to $4.78 from $4.74, notes valuations still attractive, with catalysts in the divestment of MBFC Tower 3 and positive take up rates of its upcoming launches. Credit Suisse maintains Neutral, given risk of potential disappointments in achieving sales targets on risks of policy overhang in China and Singapore. But lifts TP to $4.10 from $3.72. StanChart however, reiterates Underperform with TP $3.50, believes KPLD is not priced for a sharp decline in residential sales. Expects the latest policy changes in Singapore to result in a 30-50% decline in primary and secondary home sales.