Keppel Land stock's 52-week trading range: $2.17 - $4.72. Chart: Yahoo!

Value Investor, who is vested in the shares of Keppel Land, contributed this article to NextInsight.

Ocean Financial Centre: A 43-storey building which features eco-breakthroughs such as the largest solar panel system, an energy efficient hybrid chilled water system and an innovative paper recycling system for all offices. OFC is designed by world-renowned architectural firm, Pelli Clarke Pelli, whose portfolio includes the World Financial Centre in Beijing. Photo: Keppel Land

K REIT Asia was in the news for the wrong reasons in the last quarter of 2011. The sale of Ocean Financial Centre at S$1.57 billion to the REIT for 99 years went ahead despite the displeasure of the REIT's minority shareholders.

As a result of the sale, K REIT Asia's parent, Keppel Land will book a net gain of about S$492.7 million.

In line with the asset swap of Marina Bay Financial Centre (Phase 1) to the REIT in October 2010, Keppel Land could declare a special dividend when it reports its FY2011 results (probably) today.

When it reported its FY2010 full year results on 24 Jan 2011, it declared a total distribution of 18 cents per share, comprising a special dividend of 9 cents per share on top of the ordinary dividend of 9 cents per share.

At S$2.50 per Keppel Land share, the base case dividend yield is estimated at a respectable 3.6%.

If the special dividend of 9 cents materializes, the yield could be as high as 7.2% - a very compelling case for a blue chip Singapore company which is trading at reasonable valuations of 0.7x book with approximately 10% gearing.

Keppel Land's business is no longer totally reliant on the Singapore residential and office markets because it has successfully diversified into China, Vietnam, India and Indonesia.

Also, its Singapore investment properties (like Equity Plaza and Keppel Harbourfront), stake in the REIT and fund management business should provide Keppel Land shareholders with recurring and sustainable future cash flow.

This assures the base case dividend yield of 3.6%.

More importantly, given K REIT Asia was listed by way of an introduction on Apr 2006, there could still be an overlap in the shareholder base of K REIT Asia and Keppel Land.

In light of the unpleasant incident in November last year which raised questions over the Group's corporate governance, Keppel Land directors should do the right thing for minorities by doling out a sizable special dividend to shareholders.

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