Capitaland - RHB Invest 2015-11-04: The Great Home Sale Of China

CapitaLand - Maybank Kim Eng 2015-11-04: Strong China Performance CAPITALAND LIMITED C31.SI 

Capitaland - The Great Home Sale Of China 

  • 3Q15 results were in line with our estimates. 
  • Maintain BUY and RNAV-derived SGD4.22 TP (35% upside). 
  • China residential sales remained robust as CapitaLand sold c.2x more units than a year before. 
  • In addition, we like that it has ceased negotiations over its acquisition of Asia Square Tower 1. 
  • At a 44.7% discount to RNAV, we think valuations are still undemanding at this level. 

 Results in line. 

  • CapitaLand registered 3Q15/9M15 operating PATMI of SGD163.0m/SGD574.3m respectively. This translated to a growth of 36.2% (3Q15) and 14.2% (9M15) YoY, underpinned by the performance across all of its business units. 
  • Likewise, 3Q15 revenue and EBIT were up c.17% and c.31% YoY respectively. This was mainly driven by the higher number of units handed over to home buyers. 
  • There was also the increased contributions from development projects in China, namely Dolce Vita and The Paragon. 
  • CapitaLand’s balance sheet remains robust, with net gearing ratio standing at 0.51. 

 Stellar residential sales in China. 

  • China’s residential market proved to be robust as CapitaLand received c.2x more residential sales in the East Asian nation vis-à-vis a year ago. The company sold 2,422 residential units vs 1,057 units a year ago. This represents sales volumes of CNY3,750m and CNY1,594m respectively. Sales were mostly from Summit Era in Ningbo, Vermont Hills in Beijing, and One iPark in Shenzhen. 
  • In Singapore, meanwhile, the residential market has remained challenging, given that CapitaLand sold 45 units in 3Q15, accumulating to 237 units YTD. This equates to a decline of c.36% YoY. 

 Acquisition for Asia Square Tower 1 has been called off. 

  • CapitaLand has also announced that it has ceased negotiations with regards to the acquisition of Asia Square Tower 1. The cessation of this acquisition is a good signal to shareholders, as the reported price tag of SGD3.5bn- 4.2bn was lofty, in our opinion. 

 Maintain BUY with an unchanged TP of SGD4.22. 

  • We think that the counter remains compelling as it is trading at a 44.7% discount to its RNAV. 
  • In addition, we are confident of its “One CapitaLand” strategy – with a single listed developer integrated across asset classes, delivering a sustainable ROE of 8-12%. 
  • Maintain BUY with TP of SGD4.22.

Ong Kian Lin RHB Research | Ivan Looi RHB Research | http://www.rhbinvest.com.sg/ 2015-11-04
RHB Research SGX Stock Analyst Report BUY Maintain BUY 4.22 Same 4.22