Properties in Vietnam fully leased: KepLand

Properties in Vietnam fully leased: KepLand

It sees ‘little impact’ from accelerating inflation there


KEPPEL Land Ltd (KepLand), Singapore’s third-largest developer, said its commercial properties in Vietnam are fully leased and the company sees ‘little impact’ from accelerating inflation in the country.


Vietnam cut its 2008 economic growth target yesterday to 7 per cent from 9 per cent as the year-on-year inflation rate reached 25.2 per cent last month, the highest since at least 1992. KepLand fell 0.8 per cent to S$5.16 in Singapore trading, the lowest since March 20.


‘Our office leases are normally for the period of two years or more and are pegged in US dollars, hence we see minimal impact,’ KepLand said in an e-mailed response to queries, after analysts cut their stock price targets on concern the company’s Vietnamese projects would be a drag on earnings.


KepLand counted on Vietnam for 5.5 per cent of its net income last year, the most among Singapore’s property developers, Kim Eng Securities Pte said on Tuesday in a note to clients. Competitors including CapitaLand Ltd and Allgreen Properties Ltd are also developing projects in the South-east Asian nation.


Kim Eng cut its target share price for Keppel Land by 14 per cent to S$8.33, citing Vietnam’s falling property values. The stock has fallen for 11 of the past 12 days.


A ‘sharp decline in property prices may prove to be a consolidation phase for the market’, Wilson Liew, an analyst at Kim Eng, said in the note. ‘We are adjusting our assumptions for KepLand’s Vietnam land bank, reducing average selling prices by about 15 per cent to an average of about $1,315 per square metre and incorporating higher costs of construction.’


KepLand said it secured ‘numerous’ sites for new projects in Vietnam last year before property prices rose. The company, which started selling homes at a Ho Chi Minh City project called ‘The Estella’ in March, said the take-up rate for the development has been ‘good’.


‘The Vietnam government is taking proactive measures to address economic challenges facing the country,’ KepLand noted. ‘Foreign investors are still confident of the long-term growth potential of Vietnam. Fundamentals in the property market remain strong.’


Other analysts say Vietnam still offers potential as more people seek jobs in the country’s biggest cities.


‘Demand is driven by urbanisation, genuine buyers, and non- speculative investors,’ said Brandon Lee, an analyst at DMG & Partners Securities Pte, who has a ‘buy’ rating on Keppel Land.


He said he’s looking at a longer-term period even though earnings in the next one to two quarters may be affected.


Apartment prices in Vietnam’s Ho Chi Minh City have declined as much as 50 per cent since January, the Saigon Times Daily reported on May 26, without citing a source for the information.


Accelerating inflation in Vietnam is also causing construction costs to surge. Such costs rose as much as 40 per cent since the end of 2007, Melissa Bon and Brian Wee of Morgan Stanley Asia (Singapore) Pte said in a report last month. — Bloomberg


Source: Business Times


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