CapitaLand Limited - OCBC Investment 2016-02-18: Resilient in an uncertain environment

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CAPITALAND LIMITED C31.SI 

CapitaLand Limited: Resilient in an uncertain environment 

• 4Q15 results broadly in line 
• Buoyant home sales in China 
• FV estimate dips to S$3.68 

4Q15 results within expectations 

• CAPL’s 4Q15 PATMI decreased 39.5% YoY to S$247.7m mainly due to lower fair value gains from the revaluation of investment properties and profit contributions from Westgate Tower. 
• Excluding the impact from the sale of Westgate Tower, the group’s operating PATMI in 4Q15 would have improved by 55.7% given higher profits from its China’s residential business and better operating performances from its shopping mall and serviced residences segments. 
• Full year FY15 PATMI now cumulates to S$1,065.7m, which we judge to be broadly in line with expectations after accounting for one-time items and fair value gains. 

Record home sales in China 

• Chinese residential sales continued at a healthy clip with 2,910 units sold in 4Q15 – up 73.9% YoY versus the 1,673 units in 4Q14 – and full year sales of 9,402 homes in FY15 were 89.5% higher than the 4,961 units sold in FY14. 
• In Singapore, CAPL sold 244 units in FY15, down marginally from 278 units last year. At CapitaLand Malls Asia, same-mall NPI growth in Singapore remained stable at 2.7% in FY15 (versus 2.5% in FY14) while this slowed to 7.4% (versus 19.9% in FY14) for their Chinese malls. 
• Other operating measures in their Chinese portfolio have also broadly dipped, i.e., shopper traffic growth from 4.8% in FY14 to 3.25 in FY15; tenant sales from 9.3% psm to 7.5%; committed occupancy rate from 94.8% to 94.2%. 
• We understand that this is attributed to maturation of new malls, a change of retail mix and also enhancements initiatives, and management indicates they to see healthy rental reversions in China. 

Maintain BUY; FV estimate dips to S$3.68 

• The group’s balance sheet remains healthy; net gearing dipped marginally to 48% from 57% as at end FY14 while its cash balance increased to S$4.2b from S$2.7b. 
• A dividend of 9.0 S-cents per share was proposed. Maintain BUY; we update our valuation model with softer ASPs and higher discount rates and our fair value estimate dips from S$4.07 to S$3.68.

Eli Lee OCBC Securities | http://www.ocbcresearch.com/ 2016-02-18

OCBC Securities SGX Stock Analyst Report BUY Maintain BUY 3.68 Down 4.07