• 2Q14 results in line
• Wait-and-see for Highline launch
• Recycling capital for opportunities

No surprises in 2Q14 results

KPLD reported 2Q14 PATMI of S$107.2m, increasing 12.2% YoY mostly due to profit recognition for Plot R5B of The Botanica in Chengdu (completed in May-14) and writeback of cost accruals. We judge this to be mostly in line with expectations and YTD PATMI now constitutes 43.7% of our full year forecast. 2Q14 topline came in at S$304.6m, down 7.8% mainly due to lower revenues from Chinese projects, partially offset by contributions from The Luxurie and The Glades in Singapore.

Wait-and-see stance for Highline Residences launch

The group sold 94 homes in Singapore over 1H14, mostly from The Glades which is ~28% sold (~200 out of 726 units, ASP S$1.44k psf) as at end Jun-14. While 1H14 SG home sales have dipped 55% YoY versus the 210 total units sold in 1H13, this is in line with our expectations for a fairly muted FY14 in terms of SG home sales given the weak outlook. Management indicates that its condominium project in Tiong Bahru, Highline Residences, is ready for launch. However, again given the soft market, the group is taking a wait-and-see stance regarding the timing; pricing will likely be a key driver for sales performance for the project, in our view. In China, 1,060 home units were sold over 1H14, down 45% YoY versus the 1,940 units in 1H13. This is partially because The Botanica, a key driver for sales in 1H13, is now almost fully-sold.

Capital recycling for opportunities ahead

The group recently divested its stake in Equity Plaza, which will result in net proceeds of ~S$195.3m and a net divestment gain of S$59.5m. Management reiterates its policy of paying out about 1/3 of divestment gains as dividend, and expects to opportunistically recycle capital and replenish land-bank amidst current weaknesses in the residential sectors of its core markets, Singapore and China. Maintain BUY with an unchanged fair value estimate of S$4.09 (30% discount to RNAV).

Source: OCBC Research - 24 Jul 2014