CapitaLand - Maybank Kim Eng 2016-04-20: China Still Going Strong

CAPITALAND LIMITED C31.SI

CapitaLand (CAPL SP) - China Still Going Strong

1Q16 EPS was in line, at 23% of FY16F.
China unit sales tripled from a year ago. While this has yet to show up in its bottom line, we expect contributions in the coming quarters as more pre-sold homes are handed over.
CAPL remains a laggard among Singapore developers and we expect strong earnings deliveries to power its re-rating.

Maintain BUY and unchanged TP of SGD3.95, implying a 21% discount to our RNAV of SGD5.00.
CAPL is our top sector pick.

1Q16 net income of SGD218m was up 35% YoY though down 12% QoQ.
Its divestment of Somerset ZhongGuanChun Beijing added SGD58.6m to PATMI.
A gain of SGD30.5m was also booked from a change in use of Raffles City Changning Tower 2 from strata sales to leasing as an investment property.
Rental commitment for this office building is 34%. This compares with SGD44.7m booked from a change of use for Ascott Heng Shan, Shanghai in 1Q15.
Excluding both gains, operating PATMI was up 10.6% YoY to SGD122.3m.

Home sales in Singapore picked up from a low base. Some 222 units worth SGD506m were sold. This was a sharp jump from 1Q15’s 69 units for SGD197m. Cairnhill Nine sold 177 homes in the quarter.
China was strong with 3,377 units sold worth CNY4.5b vs 1Q15’s 1,306 for CNY2.2b.
While revenue recognition was not as stellar given that fewer units were handed over in China, we expect contributions to improve this year as over 9,000 units will be completed.

EBIT at CapitaLand Mall Asia improved 6% YoY to SGD145m. This was spearheaded by 1.5% and 7.0% YoY NPI improvements in Singapore and China respectively.
RevPAU climbed 2% YoY for its serviced residences with a 5% YoY drop in Europe made up by other regions, notably China.

Derrick Heng CFA Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2016-04-20

Maybank Kim Eng SGX Stock Analyst Report BUY Maintain BUY 3.95 Same 3.95