Upgrade to BUY at S$2.98. Post-rights, KepLand’s balance sheet strength ranks among the sector’s best, with net gearing of 0.22x and S$1.3b cash. This would enable KepLand to expand residential landbank in Singapore and China, as well as addressing concerns over office capex for MBFC and OFC. With 27% RNAV exposure to China and Vietnam, we believe KepLand is wellpositioned to ride on a recovering property sector within these emerging economies. KepLand trades at 0.95x P/B during the initial phases of property recovery cycles. We thus peg our new target price for the stock at parity to our new base case RNAV of S$2.98. Upgrade to BUY at S$2.98.

Ample arsenal of cash to pump up residential landbank. KepLand’s present rich cash coffers and low leverage should enable it to snap up new plots of land with ease. We surmise acquisitions should evolve around Singapore and China, where KepLand has been relatively quiet the last two years. With already 4.7m sqm in GFA across nine projects, Vietnam’s potential pipeline should be more than sufficient.

Interest in Chinese and Singapore mid-prime projects beckons. In Singapore, we understand that management remains focused on mid-prime residential developments, preferably of a mid-large scale. With a return of interest in mid-prime properties in the offing, we expect KepLand to benefit from an expedited re-launch of Madison Residences, Marina Bay Suites and Reflections. We also view KepLand’s residential exposure to China’s upperlower tier cities (17% of RNAV) positively, where favourable government policies and an improved credit environment have boosted volumes and sentiments.

Low impairment risk. Provisions of KepLand’s residential landbank appear unlikely, given that a substantial portion of its Chinese and Singapore residential assets were bought at low costs prior to the 2007 upcycle. Further, its Vietnamese joint partners will bear any land bank risks. Breakeven costs for its MBFC and OFC sites are also relatively low, while conservative valuations in FY08 imply low asset devaluation risks for its office portfolio.