CapitaLand - CIMB Research 2016-11-10: Tracking well to date

CapitaLand - CIMB Research 2016-11-10: Tracking well to date CAPITALAND LIMITED C31.SI

CapitaLand - Tracking well to date

  • Robust 3Q16 performance, 3Q/9M net profit makes up 35%/81% of our FY16 forecast.
  • Singapore and China residential delivers strong performance on increased sales.
  • Steady rental contributions as tenant sales and shopper traffic grew positively.
  • New acquisitions boosted serviced residence income.
  • Maintain Add, with an unchanged target price of S$4.17.

3Q16 results summary 

  • For 3Q16, CAPL reported revenue of S$1,373.7m, up 28.4% yoy and net profit of S$247.5m, up 27.7% yoy. 9M16 net profit was broadly in line with our estimate at 81% of our full-year forecast. Excluding one-offs, core net profit would have been S$251.8m, +54.5% yoy. 
  • The better showing was due to higher Singapore and China residential contributions and increased retail rental and serviced residence income. 
  • Singapore and China remained key contributors accounting for 80% of 3Q16 EBIT.

Pick up in sales volume in Singapore 

  • Singapore residential saw 206 unit sales valued at S$525m in 3Q, bringing YTD sales to S$1.24bn, 3x 9M15 level. These include progressive sales at d’Leedon, The Interlace, SkyVue and Cairnhill Nine. Launch of Victoria Park Villas in Sep had garnered take up rate of 16% so far. 
  • The group has a remaining S$1.9bn worth of residential inventory in Singapore, accounting for 4% of total assets.

Boosted by high handover, strong pre-sales 

  • China recorded a strong 3Q with a handover of 3,254 units valued at Rmb4.68bn (9M: 5,684 units, Rmb7.72bn) from Riverfront Hangzhou, New Horizon Shanghai and Vermont Hills in Beijing. 
  • It has another 9,800 units pre-sold worth Rmb14bn, of which c.40% are expected to be recognised in 4Q16, with a further 1,840 launch ready units in the pipeline. 
  • Despite the recent cooling measures, the group does not expect the impact to be significant as its projects target mainly first timers and upgraders.

Steady rental contributions 

  • Retail rental contributions improved slightly with higher income from China, thanks to the opening of CapitaMall Sky+ and new acquisitions in Malaysia and Japan. 
  • On a local currency basis, same-store NPI growth ranged from 2.2% in Singapore to 6.1% in Japan and 17.3% in India with occupancy remaining above the 90% mark. 
  • Shopper traffic and tenant sales continue to inch up in China Inorganic growth lifts serviced residence contributions Although Revpau fell 3% yoy, dragged by Singapore, China, Europe, Gulf region and India, there were higher contributions from properties acquired in 2015-16. 
  • The group has 29,682 operational units which contributed S$112m of fee income in 9M16 and is expected to deliver an estimated additional S$74m when the 17,380 pipeline units are completed.

Maintain Add 

  • Maintain Add. 
  • We leave our FY16-18 EPS estimates relatively unchanged with an unchanged RNAV-based TP of S$4.17, pegged to a 20% discount to revalued asset backing of S$5.21. 
  • We like CAPL for its capital recycling model. With a gearing of only 0.47x, the group is well positioned to capitalise on new investment opportunities including setting up of Raffles City China Fund II (RCCF II) and more private equity funds. 
  • Risks include slower than expected deployment of capital into new projects

LOCK Mun Yee CIMB Research | Yeo Zhi Bin CIMB Research | http://research.itradecimb.com/ 2016-11-10
CIMB Research SGX Stock Analyst Report ADD Maintain ADD 4.170 Same 4.170