It could see faster monetisation compared to past China buys.
Keppel could monetise from its $283m stake acquisition for its project in a Nanjing property within just months after its acquisition, UOB Kay Hian noted.
“This is different from past acquisitions in China, which tend to have a longer gestation period,” UOBKH said. “Due to the accounting treatment, earnings from the initial launch will likely manifest earliest in late 2019 or 2020.”
The research firm also noted that the acquisition price is high relative to recent transactions.
“Whilst Keppel has been selective with the project location, we are cautious on being overly positive,” they explained. “The disposal by Gemdale reflects its need to de-risk, given the weakening property market sentiment and its net gearing of 69%.”
Based on its price, Keppel bought the land at $3,643.53 (RMB18,300 psm), which, according to UOBKH, reflects a premium for the site location and high speed-to-market.
In terms of property demand, UOBKH said that Nanjing is seeing demand going down.
“Data from China Real Estate Information Corp (CRIC) showed that only 5,211 new homes were sold in August, a decline of 40% MoM,” the firm explained. “Recent land purchases also saw lower bids from developers.”
UOBKH also mentioned CRIC’s data which showed that home sales for Keppel Land China is slowing in Q318.
Situated at the core of the Nanjing Jiangbei New Area, the site in which Keppel bought 40% stake has a permissible gross floor area (GFA) of 193,139 sq m.
Keppel’s JV with Gemdale eyes to build 1,728 units of high-rise apartments and 50 units of street-front shops, with Phase 1 comprising 787 units expected to be launched in Q4 2018 and the entire project eyed for completion by Q2 2022.
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