Scuttlebutt Report: Tianjin Eco City Visit

Regular followers of my portfolio would know that I am vested in Keppel Corp since the oil crash of 2015. I have divested some this year, but it still remains a part of my portfolio. The general perception of Keppel Corp is that it is mainly a company that constructs oil rigs and is highly correlated to the fate of the oil industry. Less is talked about its property or infrastructure division. And for good reason, as traditionally it’s a main driver of net profit.

With the decline in O&M profits, Property and infrastructure will need to pick up the slack in the meantime.

Having attended this year’s AGM and read the annual report, Board Chairman Lee Boon Yang and CEO Loh Chin Hua seemed to signal a move towards more diversified streams of revenue. CEO Loh even mentioned that he hoped that the company’s shares will be “re-rated” given this new approach. This is evident in the theme of this year’s Annual Report: Solutions for Sustainable Urbanisation

Essentially, the direction revolves around Keppel Urban Solutions, the platform launched in 2017 to bring together Keppel’s various capabilities in property and infrastructure, marrying it with internal and external funds (through Keppel Capital) to design and manage smart sustainable cities of the future. The unwitting poster child of this approach is the Sino-Singapore Tianjin Eco City (SSTEC), a city designed and built from scratch on non-arable land as a collaboration between the Singapore and China governments, with Keppel Corp playing the leadership role in the Singapore half of the joint venture.

With Keppel Corp securing another project to develop Saigon Sports City in Ho Chi Minh City, coupled with the prospect of spending 2 weeks in Tianjin (which is not known as a tourist destination) for a work trip, it seemed like a productive use of my time to check out SSTEC to see if it is viable.

Overview

Above is a map of Tianjin municipality, to give you a rough idea of where the significant locations of Tianjin are located. Tianjin New Binhai Area is a Special Economic Zone intended to replicate the development seen in Shanghai Pudong and Shenzhen. The majority of the New Binhai area appears to be for industrial use at the moment, with some MNCs setting up shop here. The area’s Yujiapu financial district is still under construction. SSTEC is a sub-district of the New Binhai area.

SSTEC is a roughly 1 hour drive from the downtown area and 40 minute drive from the airport. There are roughly 80,000 people living in the city currently according to statistics.

The Journey

The journey by car from the Tianjin downtown area (where I was staying) took over 1 hour. Here are some pictures of the road to SSTEC to give you an idea of the surroundings:

The City

This aerial shot will help you understand the scale of the project:

Here are some street level shots I took:

As you can see, the vast majority of the buildings up are for residential use. There are some amenities already up like schools and neighbourhood malls. The city was not really bustling with activity at the time (early afternoon), probably because the people living there are at work in surrounding industrial district. I visited some of the local showrooms to get a better idea of the future developments of the city. Here’s the showroom for Shimao Property, a China property developer listed in Shanghai, which accounts for most of the residential properties you see in the earlier pictures:

I also wondered around the science and technology district and came across a familiar logo:

Keppel Land also had a showroom for some residential developments they have in the area. According the sales persons, they are priced at RMB1,500 per sqm, set to complete in 2020 and with only 15-20% of units remaining available.

As seen in the map shown, Keppel’s residential units are pretty well located with nearby amenities and close to the bridge that connects to the surround industrial developments and the expressway to the city. There is also a lake district nearby.

I left the city late afternoon, flanked by flags and wind turbines.

My thoughts

Singapore is renown around the world as a garden city, to see that same vision realised in a foreign country under our guidance brings me a deep sense of pride as a Singaporean, just like how we managed to hold the Trump-Kim summit. From a business standpoint, it makes sense to sell that vision and expertise especially to developing countries who wish to do it right and not succumb to excessive pollution. Keppel is uniquely positioned to be able to execute with its track record and in house property and infrastructure divisions.

As for SSTEC, it is currently situated in a pretty bad location with the CBD and Airport about 1 hour away. There are also limited things you can do nearby. However, with further development on its way with more industries setting up shop in the Binhai area and the eventual completion of the Yujiapu financial district, the land bank and developments Keppel has in SSTEC will appreciate over time.

Overall, I like the direction Keppel is taking and will look closely at the development of SSTEC, Saigon Sports City and other potential future deals that could represent significant upside.

Bonus

Here are some of my favourite photos of the Tianjin downtown area:

Happy Hunting,
KK

Disclosure: I’m invested in Keppel Corporation and this is not a sponsored post. The views here are my own
Disclaimer: The information presented does not constitute a call to buy or sell shares. It is for general information purposes only. Do your own due diligence before making a decision, friends.

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