SINGAPORE (Sept 30): The “robust” demand for residential property in Vietnam should bode well for Keppel Land, the property arm of Keppel Corp, according to CGS-CIMB Research.
The strong take up rate has been hovering from 80% to 90% since 2015. Albeit lower now, demand is still driven by an undersupply of properties, strong economic growth and delays in regulatory tightening,
This has resulted in higher prices across all residential segments.
In particular, average home price has increased annually since 2009. According to CBRE Vietnam data cited by CGS-CIMB, the increases range from 8% for affordable houses, 13% for mid-end, 23% for high-end, and 15% for luxury homes.
Given that Keppel Land derives one-third, or $84 million, of its 1H19 earnings in Vietnam, CGS-CIMB Research reckons Keppel Corp will continue to benefit from the booming property market there.
It says that higher average selling prices on the back of a supply crunch is likely to support profit before tax margins of more than 30% for its Vietnam projects.
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“We believe Keppel can leverage robust demand and firm home price appreciation of 8% to 25% per annum in Vietnam,” CGS-CIMB head of research Lim Siew Khee writes in a note dated Sept 27.
CGS-CIMB has an “add” call for the stock with an unchanged target price of $8.41.
As at 4.15pm on Monday, shares of Keppel are trading down 0.7%, or 5 cents lower, at $5.94.
According to CGS_CIMB valuations, this implies an estimated price-to-earnings (PE) ratio of 11.4 times and a dividend yield of 4.0% for FY19F.
