Keppel Land - positive on the housing market

Mgmt is positive on the housing market and plans to launch Madison (56 units) and The Promont (15 units) soon. Comparable prices are ~ S $1,700psf and S$2,000psf respectively. The 168 units in Caribbean @ Keppel Bay currently held for investment could also be released for sale this year. Recent resale transactions at $1,100-1,200psf implies gross rental yield of ~5%. Mgmt is likely to time the launch of Marina Bay Suites and the later phase of Reflections closer to the opening date of the 2 IRs.

There are signs of increasing leasing activity in the S'pore office market . Mgmt comments that no tenants have given up pre-committed space thus far and believes that the worst of rental declines could be over and the market could be approaching the trough. Current carrying cost of BFC & OFC is conservative due to low land cost and could see a revaluation surplus at year end.

In offshore markets, trends continue to be positive. In China, sales have picked up strongly with ~1,020 units sold in 2Q (vs 420 in 1Q). While prices were initially trimmed ~5% on 1Q, they have been raised again to pre-2009 levels and mgmt believes they are on track to sell around 2,000 units this year. In Vietnam, it has sold 50 units in Estella with prices maintained at US $2,000-2,200psm. Mgmt plans to accelerate launches in China, Vietnam and other markets (2,194 planned units).

Balance sheet has been significantly strengthened post rights-issue with gearing at a conservative 0.23x. Mgmt is comfortable gearing up to 0.5x which gives them around S$1bn of acquisition firepower. Mgmt is actively looking to replenish its landbank, focusing mainly in S'pore and in China, especially in cities where it has existing operations.

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