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Keppel Corporation’s real estate arm has surpassed its offshore and marine (O&M) division to become its most lucrative business, reported the Singapore Business Review.
In the first nine months of 2017, property sales accounted for 55 percent of the company’s net profit compared to 20 percent previously, while O&M made up merely two percent versus about 67 percent in the past.
According to DBS Equity Research, one of the reasons for Keppel’s profitable real estate business is that it had acquired landbank in Vietnam and China at lower prices five to ten years ago, mostly in 2007 to 2012.
Consequently, the firm has amassed a large acreage spanning 6.5 million sq m, predominantly for housing projects. Of this, 24 percent are located in Vietnam, while 68 percent are in China.
At present, 50 percent of this massive landbank are under development.
Meanwhile, about 40 percent of the total undeveloped gross floor area (GFA) is intended for dwellings, townships or mixed-use projects in Tianjin Eco-City. This was purchased from Keppel’s 45 percent joint venture partner Sino-Singapore Tianjin Eco-City Investment and Development Co (SSTEC) for around $204.91 psm before 2009.
But as of June 2017, prices of land in Tianjin Eco-City have spiked by over 14-fold to $2,827.59 psm, meaning Keppel will profit greatly when the land is developed.
This article was edited by Keshia Faculin.
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