Kepland one-time gains totaling S$1.086b

Kepland - TPS$3.53.

PROPERTY DEVELOPERS
Keppel Land is the property arm of Keppel Corp, with largely office and residential assets in Singapore, China and Vietnam.

OFC = Ocean Financial Centre
- is the first office development in Singapore's CBD to be conferred the highest Platinum Green Mark Award. OFC through its green features will see an overall energy savings of 35% or $1,817,000 annually.

Kepland announced FY11 results with a huge booster of one-time gains totaling S$1.086b mainly from the divestment of OFC and its attributed revaluation surplus, as well as partly from MBFC Ph.2 and K-REIT. The results are slightly ahead of expectations, with net profit ex. exceptional gains of S$279.7m at -0.6%YoY slightly above our expectation of S$253.3m.

Bumper dividend slightly above expectations. We previously highlighted the possibility of a special dividend for FY11 post divestment of OFC should capital deployment opportunities remain protracted. Along with FY11 results, total dividend of
20 cents per share (ex.div 26 Apr 12; 7.8% yield) has been proposed which is slightly ahead of our expectations of 18 cents per share.

Near term focus on commercial segment, Beijing acquisition announced. Post divestment of OFC, current balance sheet is healthy at c.0.1x gearing. We gather takeaways from management comments along with the FY11 results and believe KepLand’s near term focus for capital deployment lies in the commercial segment given policy overhang on both Singapore and China markets. Along with FY11 results, KepLand announced the acquisition of a 51% stake in a Beijing commercial site (2.6-ha, GFA 100,000 sm; completion end 2014) which is expected to be developed into three office blocks and retail premises in the Chaoyang district. This may allay some possible market concerns on uncertainty regarding KepLand’s currently evolving business model.

Maintain Buy, TPS$3.53. We reduce TP to S$3.53 after factoring in a lower consensus TP for K-REIT, partly mitigated by higher AUM for AIP with first closing of Alpha Asia Macro Trends Fund (AAMTF) II. Maintain BUY on account of i) steep discount of 50% to RNAV, ii) bumper dividend which may provide support to share price in the near term, and iii) any potential of China policy overhang abating in 2H12.

52 Weeks Range (2.170 - 4.624 )