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Broker's take: Nomura maintains 'buy' on Keppel Land on privatisation offer

NOMURA has maintained its "buy" call on the shares of Keppel Land (KepLand) after Keppel Corporation - which owns 54.6 per cent of KepLand - on Friday launched an offer to take KepLand private, using a two-tier price approach in its bid for the remaining shares it does not own.

Keppel Corporation's cash offer price of S$4.38 per share, or S$4.60 per share if the privatisation is successful, is in line with Nomura's target price of S$4.43 per share, said Min Chow Sai, a research analyst at Nomura.

"We recommend shareholders to take up the offer," he said.

In his research report, Mr Sai reiterated that developers are likely to perform better than Reits in 2015, and that CapitaLand and Wing Tai are likely to benefit the most from this news.

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"Our estimates suggest that some 40 per cent of CapitaLand's net asset value is represented by China properties, which is similar to KepLand. (This means that) for investors looking to redeploy capital unlocked from KepLand into Singapore-listed developers with similar exposure, CapitaLand is a good candidate."

According to Mr Sai, the valuation of Wing Tai - currently still trading at a discount of 46 per cent to Nomura's net asset value estimate of S$3.42 per share - is similar to that of KepLand (44 per cent discount to its net asset value estimate of S$3.42 per share) before the announcement of the privatisation offer.

"We believe this transaction provides a valuation benchmark for developers like WingTai which are still trading at steep discounts to net asset values," he said.

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