Acquires Shanghai landed site
Keppel Land’s (KPLD) announced that it has acquired a 100% stake in a 17.5ha residential site in Shanghai’s Seshan area on which it would develop ~200 landed homes with 250-350 sqm of net saleable area each. The acquisition cost is RMB1.33b (S$266m), including RMB584m of outstanding debt held by the acquired entity, Shanghai Jinju Real Estate Development Co., Ltd. This site is 20km away from Shanghai Hongqiao International Airport and 32km from the city centre. It also enjoys convenient access to the A9 expressway and views of the Sheshan National Forest Park. It is KPLD’s ninth project in the city of Shanghai.
Has experience in this region and product format
We note this site is about 11km southwest of Villa Riviera in the Qingpu district – the group’s first villa project in Shanghai – which comprised 168 landed homes and is 100% sold. Given KPLD’s experience with this region and product format, we are positive on this acquisition and believe it would likely be accretive. Assuming a total net saleable area of 60k sqm and construction costs of RMB6k psm, we estimate an RNAV accretion of 3.5 S-cents per share. While KPLD currently has a strategic alliance with Vanke to collaborate in the Chinese and Singapore markets, we understand that KPLD is likely to retain a full stake in this project ahead.
Raise fair value estimate to S$4.59
We favor KPLD for its strong balance sheet (S$1.1b cash, 31% net gearing), diversified portfolio exposure and the potential divestment gains from MBFC T3 as the asset stabilizes. In addition, group enjoyed a positive launch in May 13 at Corals at Keppel Bay with 132 units sold out of a total of 366 units while land-banking continues unabated in key markets Singapore and China, including the Kim Tian site recently acquired in Apr-13. We update our model for this acquisition and latest assumptions and our fair value estimate increases marginally to S$4.59 (25% discount to RNAV) from S$4.53 previously. Maintain BUY.
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