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Profits Creep Higher At Keppel Land

Keppel Land LogoResidential and commercial property developer Keppel Land (SGX: K17) posted a 0.9% year-on-year increase in quarterly profit to S$95.5m.

The company’s top-line for the quarter, meanwhile, jumped by 154% from S$130.3m a year ago to S$330.5m. The increase was predominantly due to a 258% surge in revenue to S$269.4m from Keppel Land’s Property Trading segment, which develops residential properties and townships in Asia.

In any case, the huge growth in the company’s top-line did not add anything to the bottom-line for the reporting quarter mainly because the second quarter of 2012 had much larger contributions from the Reflections at Keppel Bay project.

Interestingly, despite the recent property cooling measures seen in both China and Singapore (which are Keppel Land’s core markets), the company actually saw better sales figures in the reporting quarter in terms of residential units-sold as compared to a year ago.

This could possibly suggest robust demand and seems to be a view shared by Keppel Land’s Chief Executive Officer, Ang Wee Gee, as he commented that: “[the company sees] sustainable housing demand driven by solid economic fundamentals and favourable demographics in Singapore and China.”

Besides China and Singapore, Keppel Land is also banking on Vietnam and Indonesia as countries with “good long-term potential” for residential projects. Other plans for the company to grow would include its efforts to increase its activity in commercial-property development in Singapore and overseas.

Keppel Land’s shareholders might also be happy to know that the company’s Fund Management segment is continuing to grow, with assets under management (AUM) now standing at S$17b. For comparison, last year’s AUM was S$15b. The Fund Management Segment manages Keppel REIT (SGX: K71U), a real estate investment trust that owns a stable of offices in Singapore, Brisbane and Sydney, as well as funds released under Alpha Investment Partners, which is a wholly-owned subsidiary of Keppel Land.

The increased AUM will ultimately bring about increased fees, which are a steady source of recurring income for Keppel Land that could help offset part of the inherently-lumpy earnings in the property development business.

Keppel Land last closed at S$3.57 a share on Wednesday, carrying a Price-Earnings ratio of 7, based on profits over the last 12 months, and a trailing dividend yield of 3.4%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chong Ser Jing doesn’t own shares in any companies mentioned.