• To start sales at Tiong Bahru condo
• ASP expected at S$1.8k  - S$1.9k psf
• High single digit profit margin

Highline Residences expected to start sales this weekend

From our channel checks, Keppel Land (KPLD) is expected to begin sales this weekend at its 500-unit condominium project, Highline Residences, located near Tiong Bahru MRT station. Pricing at launch is expected to be ~S$1.8k to S$1.9k psf after discounts for the first registered group of buyers. This is in line with our expectations. We understand that about two-thirds of the project is likely to be launched for sales and the initial response from potential buyers for the single bedroom units has been firm.

Recent nearby launches achieving ASPs of ~S$1.7k psf

Nearby 469-unit project The Crest, located at Prince Charles Crescent and developed by a Wing Tai consortium, was launched earlier in June 2014 and saw only 35 units sold at a median price of ~S$1.7k psf over that month. The 429-unit Alex Residences, located near Redhill MRT station, was launched earlier in Nov 2013 with a more encouraging 203 units sold as at end 2Q14 at ~S$1.7k psf as well.

Project profit margin estimated at high single digits

To recap, KPLD purchased this 99-year GLS site at Kim Tian Road for S$550.3m (S$1,163 psf GFA) in April 2013. The tender attracted 11 bidders and KPLD’s bid was 7.2% above the second highest. Due to site regulations and restrictions, including varying maximum building heights, construction costs are likely to be higher than usual and we estimate KPLD’s breakeven price at ~S$1.7k psf, which points to a high single-digit profit margin for the group.

We continue to see value in KPLD shares at these levels and like the group for its diversified exposure across property segments and geographical regions, and firm balance sheet. Possible catalyst ahead could be the divestment of MBFC T3, which would likely lead to a potential bumper special dividend over FY14/15. Maintain BUY with an unchanged fair value estimate of S$4.09 (30% discount to RNAV).

Source: OCBC Research - 12 Sep 2014