CapitaLand - CIMB Research 2015-12-09: Multi-pronged drivers

CapitaLand - CIMB Research 2015-11-19: Visit to East China CAPITALAND LIMITED C31.SI 

CapitaLand - Multi-pronged drivers 

  • Slower Singapore residential offset by increased activity in Vietnam. 
  • China residential sales improving; replenishing landbank via M&As and JVs to optimise returns. 
  • Shopping mall operations continue to trend up. 
  • Targets to double serviced residence portfolio to 80,000 units by 2020. 
  • Maintain Add with unchanged RNAV-based target price of S$4.06. 

■ De-risking Singapore residential, lifting exposure in Vietnam 

  • The group continues to de-risk its Singapore residential portfolio with an additional S$412m sales in the first 9 months of this year. Looking ahead, it has another 432 new units that could be timed to market. 
  • Meanwhile, the group has deepened its footprint in Vietnam with two recent ventures in HCMC which will increase its residential pipeline there by another c.1,350 units. 

■ China residential activity up 

  • China residential sales have picked up pace, with 6,492 units valued at Rmb11.6bn sold in 9M15, more than 2x stronger than a year ago. This extended the group’s earnings visibility from this division. 
  • Furthermore, with another 2,000 units to be completed in 4Q, we expect China residential earnings to improve yoy. 
  • Going forward, it will replenish its landbank via M&As and JVs, as well as look for urban renewal projects to enhance its returns. 

■ Shopping mall operations remain upbeat 

  • China malls continue to enjoy high committed occupancy rate of 93.4% while tenant sales and shopper traffic improved 9.5% and 3.7% yoy, respectively. In Singapore, shopper footfalls improved 6.3% while tenant sales ticked up 1.1% yoy. 
  • Meanwhile, the Raffles City portfolio of properties is gaining momentum with four operational assets and four more to be opened over the next few years. 

■ Strategic initiatives to grow serviced residence portfolio 

  • CapitaLand expects its serviced residence operations to double the keys under its management to 80,000 by 2020. 
  • Recently, wholly-owned subsidiary Ascott has partnered Qatar Investment Authority to establish a US$600m fund to invest in serviced projects with an initial focus on Asia Pacific and Europe. It has also tied up with Tujia to extend its market reach as well as set up a JV to manage new contracts to expand its business in China. 

■ Maintain Add 

  • We reiterate our Add rating with an unchanged target price of S$4.06. 
  • With 75% of its earnings derived from recurring sources, the group has a steadily growing income base to sustain its long-term ROE targets.

LOCK Mun Yee CIMB Securities | http://research.itradecimb.com/ 2015-12-09
CIMB Securities SGX Stock Analyst Report ADD MAINTAIN ADD 4.06 Same 4.06