CapitaLand (CAPL SP) - Maybank Kim Eng 2016-11-09: Stellar Year, So Far

CAPITALAND LIMITED C31.SI

CapitaLand (CAPL SP) - Stellar Year, So Far

9M16 EPS met, at 79% of our FY16E. We expect strong sales recognition to continue as unbilled home sales in China remain high at CNY14b.
Recognition of 40% of these in 4Q16 provides sales visibility of SGD1.1b.
We raise our TP by 3% to SGD4.06 to incorporate the latest market values and TPs of its listed REITs. Our TP implies a 21% discount to RNAV. Maintain BUY.
CAPL is our preferred exposure among Singapore property developers.

Key risks to our positive view: overpaying for land and a sharp fall in property prices in China and Singapore.

3Q16 sales growth of 28% YoY was spearheaded by a ramp-up in China as more homes were handed over. We expect the momentum to continue as unbilled sales in China remain high.
CAPL guides that 9,800 units worth CNY14b have been sold. This is an increase from CNY13b of unbilled sales from 9,000 units in 3Q16. As 40% of these will be booked in 4Q16, sales visibility is SGD1.1b.

In 3Q16, CAPL sold 2,903 homes worth CNY5.8b for a 55% YoY jump in value from 3Q15’s 2,422 homes worth CNY3.8b.
While management has tampered expectations by guiding for some impact from recently implemented cooling measures in China, the onslaught will be mitigated by its focus on first-time buyers and upgraders.
Over in Singapore, 206 units worth SGD525m were sold, dramatically up from 45 units worth SGD109m in 3Q15. Sales at d’Leedon and The Interlace were notably higher. Seventeen semi-detached houses had also been sold at Victoria Park Villas by end-October.

9M16 NPI in Singapore and China improved 2.2% and 5.2% respectively on a same-mall basis. China malls were hit by a higher property tax in Beijing from 3Q16. Without this, China’s NPI growth would have been 6.0%.
Serviced apartment RevPAU was down 6% YoY in 3Q16. Singapore, Europe and the Gulf Region & India were key pressure points.

Strong rebound in China and Singapore home sales.
Monetisation of assets via a sale to its funds under management or third parties.
Higher market value of its listed REITs.

Overpaying for assets or land.
Poor execution of development projects.
Sharp increase in interest rates could hit demand for properties and drive down asset prices.

Derrick Heng CFA Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2016-11-09

Maybank Kim Eng SGX Stock Analyst Report BUY Maintain BUY 4.06 Up 3.930