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Keppel Land Gears Up in China

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Property developer and fund manager Keppel Land (SGX: K17) recently shared some great insights about its plans in China.

44% of the company’s assets are in the country and so future developments there will be of great importance to Keppel Land’s investors. Let’s dig in to find out more.

1) Great experience and a proven track record in China

Keppel Land has been doing business in China for more than 20 years and it was actually the leader of a Singapore-consortium that helped to develop the Suzhou Industrial Park in the 1990s. So, that’s some great experience there.

In addition, Keppel Land has completed over 20,000 homes and sold more than 22,000 homes to date in the country.

There should be more to come, as the company has a land bank of more than 5.6 million square metres (sqm) where 40,000 homes can be constructed.

2) Strategy in China

Since the end of 2010, Keppel Land’s assets in China have more than tripled from S$1.7b to S$5.8b as of Sep 2013 with more growth likely on the way.

Going forward, Keppel Land would be focused on five cities in the country: Shanghai; Beijing; Tianjin; Chengdu; and Wuxi. In addition, the company’s aiming to grow its commercial presence in the Tier 1 cities.

According to the company’s presentation, China’s population has been increasing at around 0.48% per year since 1953 and reached 1.34 billion back in 2010. Rising affluence amongst China’s urban dwellers is not shocking news either, but some figures are really worth noting.

For example, urban disposable income per capital has shot up by more than 50% within five years from RMB15,781 in 2008 to RMB24,565 in 2012.

With Keppel Land’s presence in the Tier 1 cities, it seems that they’ll be in position to capture a nice slice of the rising-affluence-pie.

3) A strong focus on Shanghai

There are a lot of good things happening in Shanghai right now, and Keppel Land has no intention of being left out.

One of the big developments in the city would have to be the newly set-up Shanghai Free Trade Zone in Pudong which will “promote trade and encourage foreign investments”. It’s very likely that the Free Trade Zone would bode well for the city in terms of economic development.

In addition, there’ll be a Disney theme park opening in 2015 to give another boost to the tourism, retail, and services sectors in the city.

Finally, the rising population and growing-affluence trend happening throughout the country is also evident in Shanghai.

The city, with a population of 23 million in 2012, is already one of the largest in China by population numbers. But, the momentum there isn’t stopping as the 23 million figure is targeted to hit 30 million by 2020.

On top of that, urban disposable income per capita, though growing slower in Shanghai as compared to the rest of the country, has also increased by 8.5% in total since 2008 to RMB40,188 last year.

To capitalise on Shanghai’s growth, Keppel Land has a number of projects in play, such as: a retail-cum-office development in the precinct of Park Avenue, a high-rise condominium for middle and upper-middle income buyers; The Springdale, a series of low, mid, and high-rise condominiums for middle-income buyers; and the Sheshan development in the prestigious landed enclave in Sheshan, Songjiang district in Puxi that consists of landed homes for upper-income buyers.

4) Outlook in China

Keppel Land sees the commitment of the Chinese government, through long-term measures such as property tax and land reform, in ensuring the healthy development of the residential property market to support sustained economic growth.

In the office market, rental growth is expected to remain stable, buoyed by China’s strong economy.

Finally, with the retail property market, the company expects the market “to remain buoyant” despite a slowdown in retailers’ expansion plans.

Foolish Bottom Line

Keppel Land’s businesses in China are also of great importance to Keppel Corporation (SGX: BN4), given that the former is a vital cog in the latter’s property division.

The property developer and fund manager’s also not the only local real-estate related company with a strong focus on China. CapitaLand (SGX: C31), one of Asia’s largest real estate companies, has 39% of its assets – worth some S$14.2b – located in the country.

That might give some strong credence to justify the amount of attention that Keppel Land’s paying to the Asian giant, China.

But regardless of what happens to the country eventually, investors should understand how important its future is to Keppel Land’s corporate results in the long run.

It’ll be worthwhile for the company’s investors to keep a close watch on China’s property markets.

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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.