RHB Securities 2015-08-06: Capitaland Limited - 2Q15 Results. Bolstered By Strong Sales In China. Maintain BUY.


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
BUY Maintain BUY 4.22 Same 4.22