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Blueprint For Growth Spurs Bullish Case For Keppel Land
Tradeable, Tradeable Ideas | 10 April 2014
By: Lim Si Jie
Articles (169) Profile
  1. The blueprint proposed to bring Keppel forward is positioned to profit from China’s robust demand for residential and offices.
  2. Keppel Land has a sound set of fundamentals along with its relatively worthwhile valuations.
  3. Keppel’s chart price is trending and likely to continue in its uptrend in the medium term.

Company Profile

Keppel Land Limited (K17.SI) is the property arm of the Keppel Group.

The Company is geographically diversified in Asia, with Singapore and China as its core markets as well as Vietnam and Indonesia as its growth markets. It focuses on a two-pronged strategy of property development for sale and property fund management.

Keppel Land is one of the largest listed property companies on the Singapore Exchange (in terms of total assets). Keppel Land has two property fund management vehicles, Keppel REIT, a pan-Asian commercial real estate investment trust, and Alpha Investment Partners (Alpha)

Business Model

Corporate Development

Keppel Land was listed in Corporate Knights’ prestigious Global 100 Most Sustainable Corporations in the World 2014. The Company was ranked 17th, placing it first in Asia and real estate companies worldwide.

Keppel Land recently published its FY 2013 results. During the announcement of their 2013 results, Keppel highlighted its four key thrusts for their future developments.

  1. Deepen presence in core and growth markets
  2. Recycle capital for higher returns – Sell some of the investments that have made capital gains to free up capital for investment in other real estate investment opportunities
  3. Grow commercial portfolio overseas – To tap onto demand for quality offices and retail developments in Asia (China, Indonesia, Vietnam)
  4. Focus on sustainability and innovation

Economic Profile

Statistics show that China’s urbanization rate has increased greatly in recent years – 36 percent (2002) vs. 70 percent (2050).

In addition, China unveiled an urbanization plan for the 2014-2020 periods in an effort to steer the country’s urbanization onto a human-centred and environmentally friendly path. This aligns with Keppel Land’s key thrust of growth which is expected to strengthen demand for Keppel Land’s real estate developments and quality offices.

A key point to note is that in the previous year (2012), operations in Singapore accounted for 81 percent of Keppel’s total profit. Operations in Singapore accounted for only 67 percent of Keppel’s total profit in 2013.

This decrease is mainly due to higher profit contributions from operations in China. With the robust demand for residential and offices arising from the Chinese’s rapid urbanization, Keppel’s profit from operations in China is likely to contribute greatly to its overall profit.

Fundamental Analysis

Understanding Chart Movements

Looking at Keppel’s daily chart, we can see that Keppel’s share price is limited by resistance at $3.43 with price support at $3.25.

ADX value of 35.7 indicates that Keppel Land is currently trending. Since D+ is more than D-, this trend is said to be an upward trend. The uptrend is further supported by the overlapping of 20-day Exponential Moving Average (EMA) over its 50-day EMA. Moreover, the MACD histogram is in the positive region, signaling Keppel Land’s upwards trend.

Some technical traders take Stochastic and Relative Strength Index (RSI) as an indicator to trade. Since both indicators show that Keppel is currently overbought, long term value investors may want to stay on the sidelines as prices may pull back slightly before continuing on an uptrend.

A Bullish Take on Keppel Land

Keppel Land is undervalued at approximately 31 percent off its intrinsic valuation (NAV and Enterprise Value). As China continues to release weaker than expected economic data, it may undermine Keppel Land’s value in the short term. Investors may want to get ready their cash to strike at the relatively cheap valuation of Keppel Land.

Thus, I am inclined to take a bullish stand on Keppel Land for its potential capital gains in the medium term.

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Si Jie is no stranger to investing having started his journey at a young age. He is heavily influenced by acclaimed investors such as Benjamin Graham, Peter Lynch, and John Rothchild.

Please click here for more information about this author.

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