2Q09 results ahead of forecast; offshore sales momentum picking up 2Q09 results came in ahead of forecast on higher than expected profit recognition and better offshore sales. Demand has firmed in offshore markets, especially in China townships and increasingly in Vietnam. We revise up our EPS, RNAV and TP; Buy maintained. With gearing at a low 23% KepLand looks well positioned to us to capitalise on acquisition opportunities which may further enhance NAV.

Earnings were driven by development profits, which rose 69% YoY on higher recognition and better sales in Singapore and offshore. Additional units sold in Tresor and Park Infinia also contributed. KepLand has sold more than 1,440 units in 1H09 in China with brisk take-up for township projects in Chengdu and Wuxi. Sales have also picked up in Vietnam with 30 units sold in The Estella since May.

We have fine-tuned our earnings forecast and revised our FY09-11 PATMI upwards by 4-6% on the back of higher take-up and ASP. We forecast core 2009 PATMI of S$180.8m (-15% YoY) with 2H earnings underpinned by profit recognition from pre-sold projects and stable rental and fund mgmt income. KepLand plans to launch Promont, Madison and Riviera Cove (Vietnam) in 2H09.

We revise our RNAV from S$2.55 to S$2.90 on the back of the re-rating of K-REIT and Evergro, ASP increase in selected residential projects and surplus from Tianjin Eco-City. The stock is currently trading at a 12% disc to RNAV and 1.1x P/B vs larger peers at 13% premium to RNAV. Downside risks: reversal of recovery trends for the economy, weaker than expected housing and office leasing demand.