By Cheryl Tay:
The outlook for Keppel Land’s office sector is expected to be negative for the remainder of FY 2012, despite the fact that the company has a favourable balance sheet of S$1.6 billion with a net gearing of 16 percent, according to OCBC Investment Research.
OCBC has also maintained a negative outlook for the MBFC Tower 3 divestment.
“We believe that the divestment of its stake to K-REIT is unlikely in FY 2012 as 1) Keppel Land (KPLD) has a rich cash hoard of S$1.6 billion with a net gearing of 16 percent, and 2) it would likely take some time to reach a 80 percent to 90 percent committed leasing level suitable for divestment as leasing demand in the office sector is still relatively soft,” said OCBC.
At the same time, residential sales in China remains a major challenge, with around 300 to 400 units sold so far this year (190 units in Q1 2012).
“While take-up rates remain low, we believe that prices and sales levels are likely near a trough, barring a wide-spread macro shock, as the impact of current buyer restriction curbs reaches a stable state,” OCBC noted.
Meanwhile, the leasing market has been favourable, as “The Luxurie, Reflections at Keppel Bay and Marina Bay Suites are 61 percent, 75 percent and 75 percent sold, respectively, as of end May 2012”.
“Management has set aside 150 units at the Reflections as serviced residences, and we understand 45 units have been tenanted at S$6 psf per month. We note management did not bid in the recent GLS tender for a Sengkang site beside its current project, The Luxurie, and believe this could indicate a cautious stance on the residential space and that management is bidding its time replenishing landbank,” added OCBC.
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