Capitaland - Firm Set Of 1Q17 Numbers
- 1Q17 results broadly in line.
- One time gain from The Nassim sale.
- Raising FV estimate to S$4.07.
Boosted by divestment gains from The Nassim sale
- 1Q17 PATMI increased 77.2% YoY to S$386.8m mainly due to divestment gains from the sale of 45 units at The Nassim, higher handovers from development projects in China and higher portfolio gains, partially offset by lower revaluation gains from investment properties.
- After accounting for one-time items, we deem this set of results to be broadly within expectations.
- In terms of the topline, 1Q17 revenues increased 0.4% YoY to S$897.5m as the group saw more handovers from its development projects in China and stronger rental contributions from newly acquired investment projects.
- The group recognized income over the quarter from the following Chinese developments:
- One iPark in Shenzhen,
- Riverfront in Hangzhou,
- Vista Garden in Guangzhou and
- Summit Era in Ningbo.
To hand over > 6k sold Chinese homes from 2Q17 onwards
- The group sold 2,062 Chinese homes in 1Q17, down versus 3,377 units in 1Q16 as there were less units available for sale over the quarter. That said, in terms of future income recognition, management expects to hand over more than 6k units sold with a value of approximately RMB10.5b from 2Q17 onwards, with ~60% expected to be recognized over the next nine months.
- In addition, the group also indicated that they have secured pre-leases for more than 90% of the retail components of their Raffles City projects in Changning, Hangzhou and Shenzhen in China, which are slated to open in 2017.
- We like the fact that the company has delivered a balanced set of results underpinned by its diversified asset portfolio and robust recurring income streams.
- We update our model with our latest assumptions for firmer residential prices in China and Singapore and incremental rental reversion for the group’s Chinese investment portfolio, and our fair value estimate increases from S$3.93 to S$4.07. Maintain BUY.