CapitaLand (CAPL SP) - Maybank Kim Eng 2016-11-09: Stellar Year, So Far

CapitaLand (CAPL SP) - Maybank Kim Eng 2016-11-09: Stellar Year, So Far CAPITALAND LIMITED C31.SI

CapitaLand (CAPL SP) - Stellar Year, So Far


Maintain BUY; TP raised to SGD4.06 

  • 9M16 EPS met, at 79% of our FY16E. We expect strong sales recognition to continue as unbilled home sales in China remain high at CNY14b.
  • Recognition of 40% of these in 4Q16 provides sales visibility of SGD1.1b.
  • We raise our TP by 3% to SGD4.06 to incorporate the latest market values and TPs of its listed REITs. Our TP implies a 21% discount to RNAV. Maintain BUY. 
  • CAPL is our preferred exposure among Singapore property developers. 
  • Key risks to our positive view: overpaying for land and a sharp fall in property prices in China and Singapore.


China led the way 

  • 3Q16 sales growth of 28% YoY was spearheaded by a ramp-up in China as more homes were handed over. We expect the momentum to continue as unbilled sales in China remain high. 
  • CAPL guides that 9,800 units worth CNY14b have been sold. This is an increase from CNY13b of unbilled sales from 9,000 units in 3Q16. As 40% of these will be booked in 4Q16, sales visibility is SGD1.1b.


Residential trends positive

  • In 3Q16, CAPL sold 2,903 homes worth CNY5.8b for a 55% YoY jump in value from 3Q15’s 2,422 homes worth CNY3.8b. 
  • While management has tampered expectations by guiding for some impact from recently implemented cooling measures in China, the onslaught will be mitigated by its focus on first-time buyers and upgraders. 
  • Over in Singapore, 206 units worth SGD525m were sold, dramatically up from 45 units worth SGD109m in 3Q15. Sales at d’Leedon and The Interlace were notably higher. Seventeen semi-detached houses had also been sold at Victoria Park Villas by end-October.


Retail malls improving; serviced apartments soft 

  • 9M16 NPI in Singapore and China improved 2.2% and 5.2% respectively on a same-mall basis. China malls were hit by a higher property tax in Beijing from 3Q16. Without this, China’s NPI growth would have been 6.0%. 
  • Serviced apartment RevPAU was down 6% YoY in 3Q16. Singapore, Europe and the Gulf Region & India were key pressure points.


Swing Factors


Upside

  • Strong rebound in China and Singapore home sales.
  • Monetisation of assets via a sale to its funds under management or third parties.
  • Higher market value of its listed REITs.

Downside

  • Overpaying for assets or land.
  • Poor execution of development projects.
  • Sharp increase in interest rates could hit demand for properties and drive down asset prices.




Derrick Heng CFA Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2016-11-09
Maybank Kim Eng SGX Stock Analyst Report BUY Maintain BUY 4.06 Up 3.930




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