CapitaLand - RHB Invest 2017-04-27: 1Q17 Results Boosted by Bulk Sales at The Nassim; Maintain NEUTRAL.

CapitaLand - RHB Invest 2017-04-27: 1Q17 Results Boosted by Bulk Sales at The Nassim; Maintain NEUTRAL. CAPITALAND LIMITED C31.SI

CapitaLand - 1Q17 Results Boosted by Bulk Sales at The Nassim; Maintain NEUTRAL.

  • We maintain our NEUTRAL stance with unchanged TP of SGD3.84, pegged at 20% discount to its RNAV. 
  • We believe the risk-rewards for the stock are finely balanced post the +23%YTD jump in share price.

Results Highlights

  • CapitaLand posted 1Q17 operating PATMI of SGD337.8m (+77% YoY) which was ahead of our expectations accounting for 35% of our FY17 forecasts. The higher operating PATMI was mainly due to gain of SGD160.9m arising from the bulk sale of 45units of The Nassim. We maintain our forecasts as we expect earnings to normalise in subsequent quarters.
  • Revenue rose marginally by 0.4% YoY on the higher project handovers in China. GP margins improved 6ppt to 37.2% on the back of higher margins achieved from China projects.
  • Associates contribution declined 36.8% YoY mainly due to absence if fair value gains from the change in use of Raffles City Changning Tower 2 and lower divestment gains. JV contributions however increased 114.8% on the back of higher contribution from Dolce Vita in Guangzhou (48% stake) and divestment gains from township projects.
  • Geographically, Singapore (52.8% of 1Q17 EBIT) and China (32%) accounted for bulk 84.8% (1Q16:86.1%) of EBIT. The higher EBIT from Singapore was mainly due to the bulk sale of The Nassim project during the quarter.

Key takeaways

  • In Singapore, CapitaLand sold about 83 units (1Q16:222units) during the quarter with a sales value of SGD 497m. Sales has picked post the official launch of Marine Blue with 28 units sold YTD at average price of ~SGD1,700psf. Its Stay-Then-Pay programme to move sales at d’Leedon, The Interlace and Sky Habitat have also been well-received so far. CapitaLand also noted that it has paid extension charges (six-month) of SGD3.2m for the unsold units in The Interlace and d'Leedon.
  • In China, CapitaLand sold 2,062units in 1Q17 (1Q16:3,337units) with a sales value of CNY3.8 bn(1Q16:CNY4.5bn). CapitaLand has a pipeline of about 6,974units ready to be launched for the remainder of the year. Key major projects launches include La Botanica in Xian, The Metropolis in Kunshan and Datansha in Guangzhou.
  • Other than Singapore and China, Management has also been actively investing in Vietnam in 1Q17 with the acquisition first prime commercial site in Ho Chi Minh City. CapitaLand also purchased a portfolio of four income producing Office and Retail properties In Greater Tokyo for JPY49.7bn (SGD620.1m). The properties will boost its recurring income stream by ~SGD25m annually.
  • Key catalyst ahead could be the potential acquisition of Asia Square Tower-2 in the near-term. However a potential overpricing of the asset ( > SGD3,000psf in our view) could have a negative impact on the share price.
  • Downside risks to the share price is a potential slow-down in residential sales from tightening of residential policy measures across various Chinese cities.

Vijay Natarajan RHB Invest | http://www.rhbinvest.com.sg/ 2017-04-27
RHB Invest SGX Stock Analyst Report NEUTRAL Maintain NEUTRAL 3.840 Same 3.840