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Keppel Land: Reaping From Disposal!
Tradeable, Tradeable Ideas | 03 July 2014
By: Raymond Leung
Articles (142) Profile
  1. Keppel Land divested its 65 percent interest in Equity Plaza for about $357.5 million.
  2. Equity Plaza could face difficulties in the future as CapitaGreen comes online with newer office facilities.
  3. The divestment is seen as a move to recycle capital. As such, analysts are positive as this would mean that Keppel Land could then invest in more yield accretive developments.
  4. Analysts'' updates on Keppel Land

    Last week, Keppel Land and Equity (CP) Pte Ltd (a property fund management arm of Keppel Land) divested their interests (65 percent and 35 percent respectively) in Equity Plaza. The 28 storey office building located in Raffles Place was sold for a cash consideration of $550 million to a consortium led by Sam Goi.

    Currently, the prime office building has a net leasable area of 252,135 square feet with an occupancy rate of approximately 97 percent. Equity Plaza has a leasehold tenure of 99 years commencing from 1989 and has undergone a major refurbishment works in 2009 with other improvement works being done progressively.

    Major refurbishment works have been completed at Equity Plaza in 2009

    The transaction is expected to be completed by 3Q14 with net proceeds of $195.3 million (estimated) and divestment gains of $59.5 million (estimated) attributable to Keppel Land. On a pro forma basis, the group’s net tangible asset is expected to rise by an estimated $0.04.

    The disposal of Equity Plaza is part of an initiative by the management of Keppel Land to recycle its capital. This move is viewed positively by market watchers as this will enable the group to invest in new projects which may reap higher yield.

    Furthermore, Equity Plaza is facing an imminent threat from the construction of CapitaGreen that is located across the street. Competition may be intense and disadvantageous to the property as it would have to fight for tenants with CapitaGreen which has newer specifications.

    Divestment momentum for the group is expected to continue as analysts expect Keppel Land to divest its one-third stake in Marina Bay Financial Centre Tower 3 to Keppel REIT.

    With the disposal of Equity Plaza and increasing divestment momentum from Keppel Land, analysts from DBS Vickers Research maintained their “Buy” call. They gave the group a price target of $4.65 which will give it a potential upside of 36.36 percent.

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Trained in fund management, Raymond is familiar with shares and various investment vehicles.

Please click here for more information about this author.


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