CapitaLand - CIMB Research 2017-08-03: Maintaining Momentum In 2Q

CapitaLand - CIMB Research 2017-08-03: Maintaining Momentum In 2Q CAPITALAND LIMITED C31.SI

CapitaLand - Maintaining Momentum In 2Q

  • CapitaLand's 1HFY17 earnings made up 59% of our FY17F forecast, on the higher end of our expectations.
  • Singapore residential continues to see take-up amid improving sentiment
  • Sold another 3,084 China residential units in 2Q; has RMB11.7bn of locked-in sales.
  • Actively recycling and deploying capital YTD; healthy balance sheet with debt-toequity at 0.39x.
  • Maintain Add with a slightly higher Target Price of S$4.21.

2Q17 results highlights 

  • CAPL reported 2Q17 PATMI of S$579.3m, +97% yoy. This was due to better operating performance, higher revaluation gains from investment properties in Singapore and China as well as greater divestment gains. 
  • Operating PATMI grew 21% yoy to S$207m due to higher China development profits and contributions from newly acquired properties in China and the US. 
  • 1H17 core PATMI of S$545m formed 59% of our full-year forecast.

Good sell-through rate from Singapore projects 

  • The group generated S$281m residential sales in Singapore in 2Q. 95% of its launched projects have now been taken up, including 59% of Victoria Park Villas. The remaining Singapore residential inventory makes up a small 2% of CAPL’s total assets. As such, management indicated it would continue to maintain a ‘disciplined’ strategy towards restocking its residential pipeline. 
  • That said, Singapore makes up a sizeable 35% of its asset base, with greater exposure to the commercial and retail property segments.

94% of launched units in China sold as at 2Q 

  • It handed over 1,088 residential units worth RMB3.1bn in China in 2Q. With an additional RMB4.6bn (3,084 units) of new sales during the quarter, the group has c.RM11.7bn of locked-in sales to be recognised over 2H17 and FY18. 
  • It plans to launch another 3,044 units for sale in 2H17.

Retail and serviced apartment portfolio growing 

  • Operating metrics for China malls continue to hold up, with tenant sales/shopper traffic up by 6.2%/3.1% yoy in 1H17. The newly opened RC Hangzhou, RC Changning and RC Shenzhen enjoy close to 100% committed occupancy, and Melawati Mall soft opened in July with 71% of its space taken up. There is potential for earnings uplift as these properties ramp up. 
  • The serviced residence’s footprint in the US tripled to over 3,000 units following the acquisition of a majority stake in Synergy Global Housing.

Active capital recycling and deployment 

  • Year-to-July, CAPL recycled c.S$2.4bn worth of capital from projects in Singapore, China, Japan and Germany. In turn, it has deployed capital into c.S$3.7bn worth of completed and development projects. 
  • Balance sheet has strengthened with net debt-to-equity ratio dipping to 0.39x. This puts the group in a strong position to further deploy capital into its core markets of Singapore and China as well as into Japan and Vietnam.

Maintain Add 

  • We leave our FY17-19F EPS estimates unchanged post results but tweak our RNAV a tad higher to S$5.26. Accordingly, our RNAV-based TP is adjusted to S$4.21. 
  • Continued reinvestment into new RNAV-accretive projects and capital recycling are key re-rating catalysts. 
  • Downside risks include slower-than-expected deployment of capital.

LOCK Mun Yee CIMB Research | http://research.itradecimb.com/ 2017-08-03
CIMB Research SGX Stock Analyst Report ADD Maintain ADD 4.21 Up 4.190