• 3Q14 PATMI down 10.6% YoY
• Broadly in line with our expectations
• Recycling capital into regional office/retail

Weaker contributions from property development

3Q14 PATMI decreased 10.6% YoY to S$113.0m, mostly due to lower profits from the property development segment, but partially offset by divestment gains from Equity Plaza and a share of Keppel REIT’s gain from its sale of Prudential Tower. In terms of the the topline, 3Q14 revenue dipped 59.6% YoY to S$168.7m as contributions from the property development segment fell with The Lakefront Residences attaining TOP in May 2014 and lower numbers from Park Avenue and the Springdale from Shanghai as well. 9M14 PATMI now cumulates to S$308.1m, forming 65% of our FY14 forecast, which we judge to be broadly in line with our expectations, given anticipated divestment gains from MBFC T3 ahead. In Singapore, KPLD sold about 280 residential units over 9M14 (versus 310 units in 9M13) and its newest launch, Highline Residences in Tiong Bahru, sold 28% of its 500 total units at an average price of S$1,900 psf. In China, the group sold 1,420 units in 9M14, down versus the 3,100 units in 9M13, as The Botanica in Chengdu is now almost fully-sold.

Actively recycling capital into regional office and retail assets

Over the year to date, the group has announced sales of Equity Plaza, MBFC T3, and its stakes in a retail mall (BG Junction) in Surabaya, Indonesia and a condominium development (Al Mada Towers) in Jeddah, Saudi Arabia. We estimate that the group would gather, from these four projects, total net proceeds and net divestment gains of S$954m and S$168m, respectively. Looking ahead, KPLD would expand its presence in overseas office and retail assets, particularly in China, Indonesia and Vietnam; we have seen management announce over the last three months the development of Saigon Centre Phase Two offices in Vietnam, the development of an office tower and expansion of retail space in a mixed-use development in Manila, and the redevelopment of International Financial Centre Jakarta Tower 1 in Indonesia. Maintain BUY with an unchanged fair value estimate of S$4.09 (30% discount to RNAV).

Source: OCBC Research - 23 Oct 2014