KepLand’s shareprice has rebounded by about 76% from a low of $0.995 in March, well ahead of its peers (CDL +51%; CapitaLand +61%). At its low in March, we believed that KepLand was at trough valuation, trading at 0.3x P/B ratio.

The Singapore property market has recently been experiencing a stir of activity, with interest seen in mass market projects and studio-sized mid-end projects. The key factor for the attraction of these units is affordability, which we think brings little cheer to KepLand, whose projects are predominantly mid- to high-end and larger-sized.

KepLand has announced that it is deferring the construction of Madison Residences. We also think that sales progress of the remaining 494 units at Reflections @ Keppel Bay will remain slow in 2009. Anecdotally, the median price of projects in the vicinity is 33% lower than KepLand’s median selling price of Reflections. KepLand is likely to withhold new sales of units at Reflections, rather than drastically slash prices. However, we have lowered our ASP assumptions to $1500 psf for the remaining units and $1350 psf for the remaining Keppel Bay sites.

Concerns over KepLand’s exposure to the office sector remain, as prime Grade A office rents slid to an average of $10.75 psf in 1Q09. However, we believe that no impairment is necessary for MBFC, even at a capital value assumption of $1,700 psf, due to the low land costs of $381 psf and $485 psf for the two phases. The breakeven is estimated at $1,050 psf. Its Singapore office portfolio make up 33% of our RNAV estimate.

We still like KepLand’s long-term strategy in emerging markets, which is based on sustainable growth factors and it will likely be a beneficiary of recoveries in China and Vietnam. We have further pushed back our launch assumptions for its projects, reducing our FY09 and FY10 forecasts by 28.3% and 38.1%, respectively. Maintaining our BUY recommendation at the target price of $2.62, pegged at a 50%-discount to its RNAV.