Keppel Land Limited: FY2010 Results

-Keppel Land reported FY10 revenue of $792.3 mil and strong PATMI of $1.05 bil, owing to asset swap deal and revaluation gain.
- Pre-tax profit ex. fair value adjustment slightly below expectation.
- Strong cash position of $1.59 bil and low net gearing of 0.22x
- Maintain Hold with fair value lowered to $4.99 from $5.04

FY2010 profit slightly below expectation
Keppel Land reported 4Q2010 revenue of $284.5 mil (-5.3% y-y), and net profit of $841 mil (687% y-y). For the whole 2010, revenue was $792.3 mil, a 14.2% y-y decrease, and net profit was $1.046 bil, a 644% y-y increase. FY10 revenue and PBT ex fair value adjustment were 85% and 94% of our FY10 estimates respectively.

Record profit year owing to asset swap and assets revaluation
While FY10 revenue was lower due to lower revenues reported by property trading, property investment, hotels and resorts, property services and others segments, net profit rose above $1bil mark boosted by net gain of $363.8 mil from MBFC 1 asset swap with K-Reit Asia as well as $425.8 mil fair value gain. The management declares ordinary dividend of 9 cents and special dividend of 9 cents per share.

Strong cash position of $1.59 bil and low net gearing of 0.22x
Following the asset swap and a $500 mil 5-year convertible bond issue, Keppel Land's cash position is improved substantially and net gearing stay at 0.22x. The management indicated its comfortable gearing limit of up to 0.8x which enables further strategic acquisitions by the company.

Property Trading
Revenue from property trading was $579.6mil compared to $720.8mil in FY09 (-19.6 y-y) while net profit was $208.1 mil compared to $196.4 mil in FY09. Keppel Land sold 650 residential units in 2010 compared to 384 units in 2009, largely contributed by projects: The Lakefront Residences (464 units), Reflections at Keppel Bay (110 units) and Marina Bay Suites (48 units). In China, a record home sales of >4,000 units in 2010 was achieved compared to 2,600 units in 2009, mainly contributed by projects: The Botanica in Chengdu (1,800 units), Central Park City in Wuxi (950 units), The Springdale in Shanghai (660 units) and Seasons Park in Tianjin Eco-City (460 units).

Property Investment
Rental income for FY10 was lower at $70.2 mil compared to $75.4 mil in FY09 (-6.8%) due to lower revenues from Ocean Towers and Equity Plaza in Singapore, and Saigon Centre in HCMC. Net profit was however higher at $55.2 mil (ex fair value gain and corporate restructuring surplus) compared to $43.3 mil in FY09 due to higher profit contribution from K-Reit Asia.

Fund Management
Overall the fund management segment performed well in FY10 with higher revenue and net profit of $68.7 mil and $39.9 mil compared to $42.7 mil and $21.5 mil respectively in FY09, due mainly to higher acquisition and management fees reported by Alpha Investment Partners and K-Reit Asia Management. Total assets under management increased to $11.2 bil from $9.8 bil in FY09.

Hotel and Property Services
This segment reported lower revenue of $73.8 mil compared to $85 mil in FY09 (-13.2%), and a net loss of $36.8 mil compared to profit of $78,000 in FY09. These were due mainly to an impairment provision of $10.6 mil for two hotels in Indonesia.

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