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How Keppel Land Has Managed To Grow In The Face Of Property Cooling Measures in Singapore

Keppel Land Logo

Keppel Land (SGX: K17), the listed property arm of the conglomerate Keppel Corporation (SGX: BN4), announced its second quarter results yesterday.

The company is involved with residential and commercial development projects in Singapore, China, Vietnam, Indonesia, Malaysia and Thailand. It is also a property owner and has interests in the management of real estate funds through Keppel REIT (SGX: K71U) and Alpha Investment Partners.

Although property cooling measures have been enacted in Singapore and China – Keppel Land’s main markets – by both countries’ respective governments, Keppel Land seems to have taken things into its stride.

In the first half of 2014, the company recorded a 9.7% gain in revenue to S$589.5 million. Its net profit meanwhile grew by 1.5% year-on-year to S$195 million. If the bottom-line figure is adjusted for some non-recurring income that was earned during the first half of 2013, Keppel Land’s profit actually grew by 16% year-on-year.

Most of Keppel Land’s growth had come from its overseas development projects as evidenced by how its international profit had improved by 28.2% year-on-year (much faster than the company’s total profit growth) to more than S$62 million for the first half of 2014. In turn, much of that international activity had come from China.

There is also strong progress made in its property investment and fund management segments. Profit from property investments grew a strong 18.1% year-on-year to S$60.7 million. Meanwhile, Alpha Investment Partners was mainly responsible for the stellar 34.1% growth in profit for the fund management segment; the segment ended the half-year with earnings of S$27.4 million.

Although there are positives elsewhere in its business, the company is facing a sharp slowdown in Singapore’s residential property market. According to statistics from Singapore’s Urban Redevelopment Authority (URA), new private residential sales had been slashed by more than half in the first half of 2014 compared to a year ago. Keppel Land had suffered of course with it managing to sell only 98 residential units in Singapore in that period..

Going forward, Keppel land will continue to look at ways to unlock value from its investment properties. This year, the company has already announced its divestment of Equity Plaza in Singapore. Keppel REIT would also be completing its sale of Prudential Tower soon.

Foolish Summary

So even though Singapore’s property market is tepid and affected that portion of the company’s business, Keppel Land seems to have already diversified its business in an adequate manner toward property investment and fund management; the two segments already contribute about 45% of Keppel Land’s net profit for the first half of 2014. It seems these two segments might continue to grow in the future and help the company offset a soft residential market in Singapore and perhaps elsewhere.

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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 Stanley Lim owns shares in Keppel Corp.