CapitaLand - CIMB Research 2016-04-20: No surprises

CapitaLand - CIMB Research 2016-04-20: No surprises CAPITALAND LIMITED C31.SI 

CapitaLand - No surprises 

  • CAPL’s 1QFY16 results were in line, with core net profit relatively flat yoy. 
  • Ascott and shopping mall activities underpinned bottomline in 1QFY16. 
  • Home sales in China and Vietnam were robust and the new Cairnhill Nine launch in Singapore was well received. 
  • Rising fee income thanks to more serviced residence openings and widening distribution network, with Tujia Somerset brand. 
  • Maintain Add with RNAV-based target price of S$4.07. 

1QFY16 core net profit in line, at 22% of our FY16 forecast 

  • CAPL’s 1QFY16 results were largely within expectations, with core net profit of S$152.8m (-1.6% yoy) making up 22% of our full-year estimate. 
  • Topline dipped 2.3% yoy to S$894.2m due to lower Singapore residential shopping mall revenues (following the sale of Bedok Mall to CMT), partly offset by higher Ascott, CapitaGreen rentals and China residential operations. 

Ascott and shopping mall operations performed well 

  • EBIT star performers were Ascott, with a 175% yoy jump to S$127.7m thanks to the inclusion of S$78.7m divestment gain from Somerset ZhongGuanCun Beijing. Excluding this, EBIT growth would have been 5.6%. 
  • The mall portfolio showed a 6% yoy improvement in EBIT to S$145.2m due to higher tenant sales (1-3% yoy) and shopper traffic (0.9-3.1% yoy). There were cS$1.1bn worth of China residential home sales that were handed over in 1Q, as well as rental income from CapitaGreen. 

Robust home sales to underpin earnings 

  • Looking ahead, we expect CAPL to continue growing its recurring income stream and expand its trading income base. 
  • CAPL recently launched Cairnhill Nine (250 units) in Singapore, which received a decent 72% response. 
  • In addition, it sold 3,377 homes (Rmb4.54bn) in China in 1Q and is scheduled to complete more than 9,000 units this year. 
  • Vietnam operations are improving, with 240 unit sales (S$36m). These will underpin longer-term earnings visibility. 

Expanding recurring fee income 

  • CAPL plans to expand its fee income base, with more serviced residence management contracts. It plans to open 4,900 new units in FY16. We estimate this would add S$65m to recurring fee income. 
  • It targets to double the existing 1,000 units under the new Tujia Somerset brand by end-16 to tap into the rising number of middle-class travellers in China. 
  • CAPL is well placed to capitalise on new investment opportunities, including establishing more private equity funds, with low 0.46x net gearing at end-1QFY16. 

Maintain Add 

  • We lower our FY16 EPS estimate by 3.8% and tweak FY17-18 EPS down to take into account the latest results. 
  • We maintain our Add rating but slightly raise our RNAV-based target price to S$4.07. 
  • We continue to like CAPL for its strong recurring income base that accounted for more than 70% of 1QFY16 net profit. 
  • Catalysts could emerge from the group reinvesting its balance sheet capacity in new investments such as setting up new funds.

LOCK Mun Yee CIMB Securities | YEO Zhi Bin CIMB Securities | http://research.itradecimb.com/ 2016-04-20
CIMB Securities SGX Stock Analyst Report ADD MAINTAIN ADD 4.07 Up 4.05