JPMorgan raises Keppel Land (K17.SG) target price to $4.70 vs $3.65, incorporates higher underlying property valuation assumptions, raises end-Dec 2011E RNAV by 28% to $6.12/share vs $4.85/share, according to Dow Jones.

JPMorgan says upgrades prompted by impact of group’s proposed asset swap with 45.4%-owned K-REIT Asia (K71U.SG). But retains Neutral rating “as we see few incremental catalysts for outperformance, especially when there are now more alternatives at either end of the risk spectrum for exposure to the Singapore office sector.”

JPMorgan says S-REITs such as Suntec REIT (T82U.SG), rated Neutral, offering FY December 2011E dividend yield of 6.0%, or active developers such as Overseas Union Enterprise (LJ3.SG) not rated, now have greater exposure to Singapore office sector than KepLand (down to 32% of Gross Asset Value estimate following completion asset swap).

House prefers Singapore developers, REITs with retail exposure such as CapitaMalls Asia (JS8.SG), Overweight, CapitaMall Trust (C38U.SG) Overweight, as “offer superior risk adjusted returns.”

Keppel Land +0.2% at $4.29.

CIMB in an Oct 12 research report says: "KepLand has announced that it will be divesting its one-third stake in Marina Bay Financial Centre Phase 1 (MBFC1) to KREIT at $1.43 billion or $2,450psf.

"At 32% above our assumption, the divestment has positive implications for KepLand's RNAV. The deal includes an asset swap whereby KepLand will purchase Keppel Towers and GE Towers (KTGE) for $573 million or $1,201psf from KREIT. We lower our cap-rate assumptions for KepLand's commercial assets to 4% from 5% on concrete evidence of cap-rate compression.

"We raise our end-CY11 RNAV estimate from $4.94 to $5.65 following our capital value upgrade as we see the divestment of MBFC1 leading to stronger price points for its remaining commercial assets. We peg our target price at a 10% discount to RNAV (parity previously), in line with our approach for big caps under our coverage. Target price climbs from $4.94 to $5.09. MAINTAIN OUTPERFORM."