CAPITALAND LIMITED
C31.SI
Bolstered By Strong Sales In China
- CapitaLand’s 2Q15 results were in line with our estimates.
- Reiterate BUY with a RNAV-derived TP of SGD4.22, implying a 33% upside.
- Apart from its core markets, the company will also focus more on growth markets like Vietnam, Indonesia and Malaysia this year.
- Its projected FY15 group capex is over SGD1bn.
- At a 43.6% discount to RNAV, we think valuations are still undemanding at this level.
2Q15 results in line.
- CapitaLand recorded 2Q15 operating PATMI of SGD256.1m (+87.6% YoY), mainly driven by a change in its business plans for The Paragon and Raffles City Changning from strata sales to leasing as investment property.
- Revenue came in strongly – up 17.8% YoY to SGD1.03bn for the quarter, mainly driven by higher contribution from development projects in China, partially offset by development projects in Singapore and Vietnam.
- Collectively, the two core markets of Singapore and China accounted for 79.6% (2Q14: 72.9%) of the company’s revenue.
Healthy core markets.
- CapitaLand sold 37 residential units (2Q14: 161 units) in Singapore at a total value of SGD106m, compared with SGD253m a year ago.
- The lower sales volume was mainly due to an absence of new project launch for the quarter.
- Despite the lower sales volume, we are encouraged that most of CapitaLand’s units were substantially sold.
- In the pipeline, we are expecting The Nassim and Cairnhill to be ready for launch by early 2016.
- While in China, CapitaLand sold 2,764 residential units vs 1,054 units a year ago. Sales were mostly from Riverfront in Hangzhou, Dolce Vita in Guangzhou, and La Cite in Foshan.
- Management expects to yield ~5,803 new launch ready units for the next six months in 2015, of which 29.1% will be launched in Tier-1 cities.
Our view.
- We like the fact that 94% of CapitaLand’s China exposure by value is in Tier 1-2 cities, which limits downside risk.
- We are keeping our eyes on more synergistic benefits related to its “One CapitaLand” strategy – with a single listed developer integrated across asset classes, delivering a sustainable ROE of 8-12%.
- Management reiterated it will achieve this via its stance of having 25% trading properties and 75% investment properties in allocated assets.
- Reiterate BUY with our TP unchanged at SGD4.22.
Ong Kian Lin | Ivan Looi | http://www.rhbgroub.com/ RHB Securities 2015-08-06
4.22
Same
4.22