June 14, 2008


Keppel Land shares falter on weak property market

SHARES of Keppel Land have been under pressure this week, as the property developer faces headwinds in both its domestic and overseas markets.

One testing spot is Vietnam, where a cooling property market and concerns of a potential devaluation of the Vietnamese dong have hit sentiment.

Keppel Land has about US$7 billion (S$9.66 billion) worth of projects in Vietnam, a larger exposure than those of rival developers such as CapitaLand, GuocoLand and Allgreen Properties.

This could 'affect the affordability of the local buyers', said CIMB-GK in a report yesterday. 'We see capital values falling below our base-case assumptions of US$2,000 to US$2,500 per sq m.'

The brokerage suggested Keppel Land's stock could have been oversold. It maintained its 'outperform' call but slashed its target price from $7.73 to $6.68 after reducing earnings estimates on lower contributions from Vietnam.

Keppel Land is down 13 cents, or 4.66 per cent, this week and off 29.3 per cent this year compared to a 13.5 per cent decline in the benchmark Straits Times Index.

On the home front, Keppel Land and other developers are facing the challenge of a deteriorating property market, particularly in a high-end sector facing price weaknesses.

Analysts point to a lack of transactions, low take-up rates and delay in launches by developers.

High-end properties are at a 'greater risk to further price corrections, as there is still a substantial pipeline of projects waiting to be launched', said OCBC Investment Research in a report on Thursday.

'We remain cautious over developers that have large land-bank exposure in the high-end market, like CapitaLand and Keppel Land.'

OCBC is reviewing its calls on Keppel Land, as well as CapitaLand and City Developments, among others, and has a 'neutral' view on the Singapore residential property sector.


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