Quick Comment: With no clear visibility of a macro recovery, which we believe is required ahead of a physical property market recovery, we continue to believe that Keppel Land’s share price is likely to trade towards our bear cases, which suggests the stock trading down to the S$1.05-S$1.25 levels in the near-term. Maintain Equal-weight rating.

What's new: KepLand’s FY08 earnings came in 23% and 17% below our estimates on the operating and net profit levels respectively. This was mainly due to achieved residential sales and profit recognition falling short of our expectations. No provisions on its residential landbank and no impairments on its investment buildings were made this quarter. Management expects physical markets to remain soft in 2009, but is comfortable with its balance sheet with only 9% out of a total S$2.1bn of debt due for refinancing in 2009 and 36% due in 2010-2011. While KepLand is not planning to raise funds via a rights issue, it will be seeking shareholders’ approval for a proposed dividend reinvestment scheme, where shareholders will be given a choice of either taking cash dividends or reinvesting the dividends by acquiring additional shares in the company, in its effort to conserve cash.

Caution - Bears still lurking: Our inclination to remain cautious on the developers, focusing on our two bear case scenarios was substantiated with the recent downgrade in Singapore’s 2009 GDP forecast to -3.5% by our economics’ team, ahead of the Singapore government’s own GDP revision today, to -5% to -2% range for 2009. While we have imputed drastic residential price assumptions in our base case scenario, the rapid deterioration of the Singapore office sector may have not been fully reflected in our base case NAVs. City Developments (Underweight rating) is the biggest loser, followed by KepLand, potentially trading down to S$3.33-S$4.23 and S$1.05–S$1.25 respectively.