Keppel Land Says Viet Nam Properties Fully Leased

Keppel Land Ltd., Singapore's third- largest developer, said its commercial properties in Viet Nam are fully leased and the company sees ``little impact'' from accelerating inflation in the country.

Vietnam cut its 2008 economic growth target today to 7% from 9% as the year-on-year inflation rate reached 25.2% last month, the highest since at least 1992. Keppel Land fell 0.8% 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 U.S. dollars, hence we see minimal impact,'' Keppel Land 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.

Keppel Land counted on Viet Nam for 5.5% of its net income last year, the most among Singapore's property developers, Kim Eng Securities Pte said yesterday in a note to clients. Competitors including CapitaLand Ltd. and Allgreen Properties Ltd. are also developing projects in the Southeast Asian nation.

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

`Consolidation Phase'

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 Viet Nam land bank, reducing average selling prices by about 15% to an average of about $1,315 per square meter and incorporating higher costs of construction.''

Keppel Land said it secured ``numerous'' sites for new projects in Viet Nam 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,'' Keppel Land said. ``Foreign investors are still confident of the long-term growth potential of Viet Nam. Fundamentals in the property market remain strong.''

Other analysts say Viet Nam still offers potential as more people seek jobs in the country's biggest cities.

``Demand is driven by urbanization, 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 Viet Nam's Ho Chi Minh City have declined as much as 50% since January, the Saigon Times Daily reported on May 26, without citing a source for the information.

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