Good results, but likely a non-event. KepLand reported an FY12 core PATMI of SGD451.5m, up 61.4% YoY. This was 13% higher than our and consensus estimates, but due to the lumpy earnings recognition, we believe it is a non-event. More pertinently, management remains optimistic about the Chinese market, as well as the long-term prospects of the Singapore residential market despite the recent cooling measures. A 12 ct/share dividend has been proposed. Maintain BUY.

Strong earnings from Singapore. Singapore accounted for 81% of KepLand’s FY12 core PATMI, mainly due to contributions from Reflections at Keppel Bay and Marina Bay Suites. In terms of actual sales, KepLand sold ~430 homes in Singapore and ~1,650 homes in China. Management will monitor the market 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.

Cooling measures = acquisition opportunities? Management’s view on the latest round of cooling measures is that it is generally good for the sustainability of the property market. While it expects sales volume to decline, prices are likely to hold given the low interest rate environment and the medium to long-term prospects in Singapore. New CEO Mr Ang Wee Gee also suggested that developers with strong balance sheets like KepLand may even benefit should weaker developers be pressed to sell their assets at attractive prices.

MBFC Tower 3 now 79% committed. MBFC Tower 3’s commitment rate has inched up from 3Q12’s 76%, with financial tenants accounting for 50% of the NLA so far. As the commitment rate is still short of the 90%-mark, which in our view would make the asset attractive enough for Keppel REIT, a divestment is unlikely in 1H13. However, with more aggressive marketing, a divestment in 2H13 is still possible.

Valuations are attractive. We have adjusted our target price to SGD4.78 and maintain our BUY recommendation. Catalysts to look out for include the divestment of MBFC Tower 3 and the positive take-up rates of its upcoming launches.

Source: Maybank Kim Eng Research - 24 Jan 2013