Fair value gains aside, KepLand’s FY13 results were largely in line with expectations. Maintain BUY and TP of SGD4.60. 

800 homes were sold in China in 4Q13 as expected (3,870 units for the full year). We expect demand from upgraders and first-timers to remain healthy in 2014.

A dividend of 13 SGD cts/share has been proposed, translating into an attractive yield of 4%.

What’s New

Excluding fair value gains of SGD302.2m, KepLand reported FY13 PATMI of SGD583.7m, which was largely in line with expectations. Further excluding divestment gains, core PATMI dipped slightly by 5.4% YoY to SGD427.3m, due mainly to lower net profit from property trading. Operationally, home sales were within expectations, with fundamental demand in China remaining healthy. Vietnam is showing early signs of a possible recovery, with 170 units sold by KepLand in 2013, mainly from The Estella. In Singapore, MBFC Tower 3 is now at 95% commitment, but sales at The Glades have slowed (121 out of a total of 726 units sold).

What’s Our View

For 2014, we expect KepLand to maintain its focus on growing its operations in China, where demand from upgraders and first- timers can be sustained in our view. Management expects a “soft landing” for Singapore residential and will be more selective on land acquisitions. It plans to launch the Tiong Bahru site in 1H14 (est. breakeven price of SGD1,545 psf).

Management remains tight-lipped on the future of MBFC Tower 3, stating that a sale is possible if a good offer is received. Redevelopment plans for the Keppel & GE Towers site have been amended to one for a mixed development of 250 apartments and 342,000 sq ft of commercial space (original plan was for a 590-unit residential development).