Keppel Land 3Q results – Cautious outlook

CLSA take on Keppel Land

We have yet to officially cover this stock. Dhruv has gone through the results and management commentary is rather cautious on all segments, with Singapore office related comments getting more conservative now. Earlier they commented on balanced demand and supply for the next few years, now they only talk about supply being low till 2009. Also no estimate has been given on office supply demand. Outlook on Singapore and China residential has also tapered down.
We also see a slowdown in launches. As of June 30 08, 777 Singaporean units were planned to be launched in 2H08. Only 498 units have actually been launched. Marina Bay Suites and The Promont launch has been delayed to 2009 now. Within the Chinese market, the earlier target of 3,705 new units getting launched in 2009, has now been lowered to 2,796 units.

MBFC pre-let progress looks weak. As of 3Q08 end, 61% of the space at the MBFC has been pre-leased, up only 1% from 2Q08. Phase I is now 66% committed (up from 64% in 2Q08), while Phase 2 has been 55% pre-leased (flat QoQ). This means that only 32k of new space was pre-leased in the quarter, against news flow of over 230k. We need to check.

On the results: 3Q08 revenue arrived at S$185.7m, down 51% YoY and flat QoQ. Sequential revenue from residential property sales dropped 3%QoQ, but that from hotels/resort/property management business grew 40%QoQ.
Reported 3Q08 PATMI arrived at S$46.2, down 44% YoY and 12% QoQ. Excluding the on-off gains in 2Q08, 3Q08 PATMI was actually up 2%QoQ. Sequential earnings from residential property sales grew 44%, while profits from hotel operation turned negative (3Q08 registered a loss of S$10.5m, against a S$2.5m profit seen in 2Q08).
Earnings are largely below consensus as 3Q09 PATMI of S$159.1m, is about 62% for consensus full year 2009 estimates.
New residential units sales in the quarter were limited. 14 new units were sold at Reflections (S$2000psf), while 28 were sold at Park Infinia and Tresor (S$1500-1600psf).
Net debt to equity remains at 54%, no change. Only 7% of the debt is coming for refinancing in a year. Funding costs are at 2.5%, but only 15% of the company's borrowings are at fixed rates.