Keppel Corporation - OCBC Investment 2017-10-27: Active In China

KEPPEL CORPORATION LIMITED BN4.SI

Keppel Corporation - Active In China

Keppel Corporation announced yesterday that Keppel Land China has entered into an agreement with Delight Prime Ltd (unit of HK-listed Logan Property) to divest its 100% stake in Keppel China Marina Holdings Pte Ltd (KCMH) for approx. RMB2.9b (~S$597.4m), subject to completion adjustments.
KCMH indirectly owns an 80% effective interest in Sunsea Yacht Club (Zhongshan), a JV which owns and develops Keppel Cove, an integrated residential cum marina lifestyle development on Modao Island in Zhongshan city, China. Recall that Keppel China Marina Holdings entered into a JV with Sunsea Yacht Club (HK) to develop its first integrated residential cum marina lifestyle development in Zhongshan in 2008.

The consideration was arrived at after taking into account the unaudited NAV of KCMH Group and the market value of the unsold inventories and remaining undeveloped land. With this divestment, a gain of about S$290m is expected to be recognised. Completion is expected to take place by the end of this year.

We are positive on the group’s strategy to recycle assets to seek higher returns and rebalance its portfolio to focus on selected high growth cities in China.
KEP’s Tianjin Eco-City project is also bearing fruit, with average selling prices of Eco-City residential land having increased significantly since 2016 – RMB1,700/sm in 2014, RMB1,900/sm in 2015, RMB6,300/sm in 2016 and finally RMB13,800/sm this year.
Do note that land sales from this project (to either KepLand or other property developers for development) are accounted for under the “Investments” segment of KEP.
Recall that KEP has a 45% effective stake in SinoSingapore Tianjin Eco-City Investment and Development, which acquires land from the Chinese government based on prices that were fixed earlier in 2008. We take this into account in our sum-of-parts valuation, and after adjusting our estimates, our fair value rises from S$7.73 to S$8.31. Maintain BUY.

Low Pei Han CFA OCBC Investment | http://www.ocbcresearch.com/ 2017-10-27

OCBC Investment SGX Stock Analyst Report BUY Maintain BUY 8.31 Up 7.730