CapitaLand - CIMB Research 2016-08-05: Growth momentum continues

CapitaLand - CIMB Research 2016-08-05:  Growth momentum continues CAPITALAND LIMITED C31.SI 

CapitaLand - Growth momentum continues

  • 2Q16 net profit in line, accounting for 24% of our FY16 forecast. 1H16 net profit made up 46% of our full-year.
  • Results helped by better Singapore residential and office rental income.
  • China to continue to perform well into 2H, sales momentum remains robust.
  • Ascott and CMA continue to be driven by acquisitions and organic improvements.
  • Maintain Add with a higher RNAV-based target price of S$4.17.

32% yoy bottomline improvement excluding one-offs

  • CAPL’s 2Q16 revenue rose 10% yoy to S$1.13bn (US$837m) thanks to higher Singapore and China residential, better Ascott and rental income. 
  • Headline net profit was 37% lower at S$294m due to a smaller revaluation surplus and other gains. 
  • On a core earnings basis, 2Q16 would have been 32% higher yoy at S$172m. 
  • Singapore and China remained the largest contributors at 78% of EBIT.

Higher Spore on residential and CapitaGreen

  • Singapore operations grew on revenue from Cairnhill Nine (78% sold) and progressive sales from ongoing projects. The group sold 82 units in 2Q, from SkyVue, d’Leedon, Cairnhill Nine, Interlace and The Nassim (5 units).Some of these projects are affected by extension charges and we expect the group to maintain a portfolio de-risking strategy and keep pricing competitive. 
  • It would also look for opportunities to replenish landbank. 
  • Rental income was boosted by increased contributions from CapitaGreen.

Expect better 2H from China residential

  • China saw a higher handover of 1,657 units in 2Q, valued at Rmb1.96bn, from projects like Vermont Hills Beijing, Dolce Vita Guangzhou and La Botanica Xian. Momentum was robust with sales of 2,896 units in 2Q, +5% yoy. 
  • In total, CAPL has sold c.9,000 units worth Rmb13bn, to be recognised over the next few years. About 60% of this is set to be handed over in 2H16 and will underpin contributions from China residential.

Moderated but still growing

  • The retail mall business was impacted by the income vacuum created by the sale of Bedok Mall and Bedok Residences, but partly offset by contributions from newly completed/acquired properties. 
  • Underlying operating metrics remain healthy with portfolio tenant sales growing 7.3% in China and committed occupancy rate of 94.2%.

Ascott continues to build a global platform

  • Although RevPAU dipped 4% yoy in 2Q, revenue jumped 81% yoy on contributions from newly acquired/opened properties. The group has 18,592 operational units at present and another 28,358 under development. This has the potential to double its current fee income of S$75m when completed.

Maintain Add

  • We tweak our FY16-18 EPS estimates and retain our Add call with a higher RNAV based TP of S$4.17, pegged at a 20% discount to the asset backing of S$5.21, after adjusting for the new valuations of CCT and ART. 
  • We like CAPL for its strong recurring income base. With a gearing of only 0.46x, CAPL is well placed to capitalise on new investment opportunities, including setting up more private equity funds. 
  • Risks include slower than expected deployment of capital into new projects.

LOCK Mun Yee CIMB Securities | YEO Zhi Bin CIMB Securities | http://research.itradecimb.com/ 2016-08-05
CIMB Securities SGX Stock Analyst Report ADD MAINTAIN ADD 4.17 Up 4.07