Why Keppel Land's 31.9% profit plunge is not too worrisome

Profit drop came mostly from payment timing.

In a release, Keppel Land announced a net profit of $96.6 million for the quarter ended 31 March 2013, a fall of 31.9% from $141.9 million earned for the same period in 2012. The company said this was due to a 57% drop in profit from property trading to $56.9 million as a substantial number of units from Reflections at Keppel Bay, sold under the deferred payment scheme, were recognised in the first quarter of 2012.

Net profit from property investment was up 22.6% to $24.4 million with improved performance from Keppel REIT and higher contribution from Marina Bay Financial Centre Phase 2 which was completed in March 2012.

Higher fee income for Keppel REIT Management and Alpha Investment Partners increased earnings from property fund management to $14 million, a 25% increase from $11.2 million in the first quarter of 2012.

What else drove and will drive the company forward?

Here's more from Keppel Land:

Strategic Alliance to Drive Growth

Keppel Land has announced its strategic alliance with China Vanke (Vanke) to jointly develop properties in Singapore and China. The collaboration will allow Keppel Land to leverage Vanke’s expertise and extensive presence to scale up in high‐growth cities in China. The first joint venture project will see Vanke taking a 30% stake in Keppel Land’s condominium development in Tanah Merah for a cash consideration of about $136 million.

Market Remained Resilient Despite Property Measures

Despite the latest cooling measures announced in January 2013, home sales remained strong with about 5,500 units sold in the first quarter of 2013, supported by demand from first‐time homebuyers and discounts provided by developers.

Keppel Land sold about 60 residential units in Singapore in the first quarter, mainly from The Luxurie in Sengkang, which was fully sold in March. Riding on the positive residential sales momentum, the Group plans to launch Corals at Keppel Bay soon. Located next to the Harbourfront MRT station, the development will comprise 366 premium waterfront homes, mostly one‐ and three‐bedroom units with sizes ranging from 600 sf to 1,500 sf.

The demand for Grade A office space remains resilient, supported by take‐up from the non‐financial sectors. To date, the commitment level at Marina Bay Financial Centre Tower 3 has increased to about 86%, up from 79% as at end‐2012, with new tenants coming from technology, energy trading, financial services, commodities and specialist food providers.

Keppel Land’s property fund management business continues to grow its total assets under management, which amounted to $15.4 billion as at end‐March 2013. Keppel REIT has signed on a new tenant, OBE Insurance Group at 8 Chifley Square in Sydney, bringing the pre‐commitment to over 56%. Alpha Investments Partner (Alpha), through Alpha Asia Macro Trend Funds (AAMTF) II, acquired a stake in Life Hub @ Jinqiao (Life Hub) in Shanghai jointly with Keppel Land China. The same fund acquired Hotel ibis Novena in Singapore while its predecessor fund AAMTF divested a retail development, Podo Mall in Seoul, South Korea.

Steady Sales Momentum in China

China achieved improved home sales with 850 units sold in the first quarter, compared with the 190 units and 690 units sold in 1Q and 4Q 2012 respectively. Sales were mostly from The Botanica township in Chengdu and The Springdale in Shanghai. Leveraging the steady sales, the Group plans to launch for sale Seasons Residence in Nanxiang, Park Avenue Heights and Hill Crest Villa in Chengdu, as well as Waterfront Residence in Nantong over the next few quarters. In line with its strategy to grow its commercial presence in high‐growth cities, Keppel Land China partnered Alpha to acquire a stake in Life Hub, a retail mall located next to the Metro Line 6 Jinqiao Station in the Pudong District.

The Group will maintain its focus on the two core markets of Singapore and China, and strengthen its market position in Indonesia and Vietnam. The Group will look out for opportunities to acquire more residential, commercial, township and mixed‐use developments in these markets.