Property developer and fund manager Keppel Land (SGX: K17) is an important part of Keppel Corporation’s (SGX: BN4) property division and is itself, the manager of Keppel REIT (SGX: K71U), a real estate investment trust that specialises in premium commercial buildings in Singapore and Australia. With a market capitalisation of around S$5.6b, Keppel Land’s not exactly small nor devoid of investor interest. With that in mind, it might be interesting to learn more about what makes the company tick. The company recently released presentation slides for investor meetings taking place between Nov and Dec 2013. Here are…
Property developer and fund manager Keppel Land (SGX: K17) is an important part of Keppel Corporation’s (SGX: BN4) property division and is itself, the manager of Keppel REIT (SGX: K71U), a real estate investment trust that specialises in premium commercial buildings in Singapore and Australia.
With a market capitalisation of around S$5.6b, Keppel Land’s not exactly small nor devoid of investor interest. With that in mind, it might be interesting to learn more about what makes the company tick.
The company recently released presentation slides for investor meetings taking place between Nov and Dec 2013. Here are some important facts about Keppel Land gleaned from those slides.
1) Keppel Land’s asset breakdown
The chart below shows the geographical spread of Keppel’s S$13.2b in assets as of 30 Sep 2013. And from there, we can see the importance of China and Singapore to the company’s overall business. Assets located in those two countries make up 88% of its total asset base.
2) Keppel Land’s core businesses
According to the slides, Keppel Land’s core businesses are the development of property for sale and property fund management.
Under the former, the company is involved with lifestyle-residential developments, townships, investment-grade offices, and mixed-developments.
With the latter, the company has total assets under management of S$17.3b with S$6.8b coming from Keppel REIT and S$10.5b stemming from five private equity funds managed by Alpha Investment Partners, a subsidiary of Keppel Land.
Management has also classified its geographical markets under ‘Core’ and ‘Growth’. Its core markets lie in Singapore and China (no surprises there given the geographical-distribution of their assets). In particular, the cities that Keppel Land are focused on in China include Shanghai, Beijing, Tianjin, Chengdu, and Wuxi.
For its growth markets, the company’s looking at the cities of Jakarta and Ho Chi Minh in Indonesia and Vietnam respectively.
3) Keppel Land’s outlook for its core markets
The company’s fortunes going forward can be said to be largely tied to the property markets of Singapore and China. Here’s what the company has to say about them.
In the residential property segment in Singapore, Keppel Land had experienced slower home sales after the onset of property-cooling measures by the government such as higher upfront payments for non first-time buyers and stricter criteria regarding approval of housing loans.
Only 2,430 units were sold in the third quarter of 2013 compared to 4,538 units in the second quarter with the company expecting take-up for the on-going fourth quarter to be between 2,000 to 2,5000 units.
Within the commercial property segment, Keppel Land’s looking at a modest recovery in Grade A rents in the fourth quarter of this year through to 2014 before picking-up pace in 2015.
CapitaCommercial Trust (SGX: C61U), a REIT that focuses on commercial buildings in Singapore, particularly in the Central Business District (CBD), has been seeing its rents pick up over the last few quarters, so it seems that there’s some weight behind Keppel Land’s view on office rents.
In addition, Keppel Land’s expecting a stronger leasing market in Singapore’s CBD in 2014.
Moving on to China’s residential properties, Keppel Land’s of the opinion that the Chinese government is “committed to the healthy development of market to support sustained economic growth.” An apparent slowdown in economic growth in China notwithstanding, it appears that the country’s future works fine for Keppel Land’s residential-property-business at least.
However, unlike the residential property segment, Keppel Land highlighted lower GDP growth as an area of concern for the commercial segment. Though, it did mention that the take up of Grade A office space in Beijing among the financial, energy, and professional services sectors “remained active.”
4) Keppel Land’s outlook for its growth markets
While it’s important to focus on Keppel Land’s core markets, at the same time, investors shouldn’t disregard the smaller-but-growing markets. Here’s what the company has to say about Indonesia and Vietnam.
In Indonesia, Keppel Land sees the “office market supported by continued take-up and limited supply of Grade A office space.”
The company also mentioned that the Indonesian government has raised interest rates to “rein in inflation and stabilise [the] currency.” The way I see it, the intended effects of the interest rate hike, should they come to fruition, should be beneficial for the country’s economy.
In Vietnam, Keppel Land sees support for the Grade A office market coming from higher occupancy and rentals. In addition, the proposal by the country’s government to ease restrictions on foreign purchases “bodes well” for the residential property market.
Foolish Bottom Line
It’s always important to learn about the companies we’re interested in before we make any investment. And even after our dollars are plonked in, it pays to continue learning more and keeping track of changes within our investments.
There’s a problem though: information can be hard to find on occasion. But sometimes, various publicly-listed companies do give investors a helping hand by releasing informative reports or presentations outside the customary annual reports and quarterly earnings release.
It’ll likely do well for an investor to make use of such resources.
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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.