CapitaLand Limited - Phillip Securities 2018-11-16: Tailwind From China

CAPITALAND LIMITED (SGX:C31) | SGinvestors.io CAPITALAND LIMITED (SGX:C31)

CapitaLand Limited - Tailwind From China

  • Revenue and PATMI in line with our forecasts.
  • Bumping up recurring income with acquisition of US multifamily portfolio and third Raffles City integrated development in Shanghai through its RCCIP III fund.
  • Healthy same-store tenant sales growth in SG and China, CapitaLand’s biggest market.
  • 4Q18 to be a bumper quarter for the year stemming from China residential pre-sales; > 90% take-up rates in 4Q18 launches so far.
  • Maintain ACCUMULATE with adjusted Target Price of S$4.00 (prev S$4.19).



The Positives


Bumping up recurring income.

  • CapitaLand invested in a S$1.1bn portfolio of US multifamily properties and a 70% stake in TAUZIA, Indonesia’s leading hotel operator, boosting its recurring income portfolio. Operating PATMI improved 13.3% y-o-y from new properties in Singapore, China and Germany. 
  • Outside the quarter, CapitaLand announced its third Raffles City integrated development in Shanghai via its Raffles City China Investment Partners III (RCCIP III) fund – construction is expected to be completed by June 2019. These are all in line with CapitaLand’s aim of adding S$10bn AUM by 2020 and its overall portfolio reconstitution strategy.

Healthy same-store tenant sales growth in SG and China.

  • Singapore retail portfolio saw +2.2% (vs CMT’s +0.5%) in y-o-y tenant sales growth in 9M18, largely driven by ION Orchard which saw a y-o-y +2.9% growth in 3Q18.
  • Retail portfolio in China (CapitaLand’s largest retail portfolio) clocked in a robust +20.9% y-o-y tenant sales growth in 9M18.


Active capital redeployment.

  • Acquisition of two prime residential sites in Guangzhou, which will yield c.1300 units by 2021, closely follows the acquisition of a mixed-use site in Chongqing.
  • In Singapore, CapitaLand had successfully acquired (JV with City Developments Ltd) the Sengkang Central mixed-use site for S$778mn. Fair value gains of S$131.5mn were also recognised from the divestment of CapitaLand’s 70% stake in Westgate.


The Negatives


New launches in China still to be deferred due to cooling measures.

  • CapitaLand had previously deferred several launches due to ongoing cooling measures and restrictions in selling prices across certain projects.


Outlook

  • Management communicated that 4Q18 will be a bumper quarter for the year for China residential pre-sales, as evidenced by the c.S$397mn (RMB2bn) of China residential sales recorded in September/October. Launched units in 4Q18 YTD saw > 90% take-up rates for La Botanica, The Metropolis, The Lakeside, and Parc Botanica.
  • Healthy momentum is expected to persist for the remaining c.1850 units in 4Q18, the release of which will be subject to regulatory approval.
  • Recurring income from investment properties (c.80% of total assets) is stable and grounded on healthy operating metrics.


Maintain ACCUMULATE with an adjusted Target Price of S$4.00 (prev S$4.19).

  • We maintain our ACCUMULATE rating with an adjusted target price of S$4.00, following a change of analyst.
  • Our target price translates to a FY18e P/NAV ratio of 0.72x.





Tara Wong Phillip Securities Research | https://www.stocksbnb.com/ 2018-11-16
SGX Stock Analyst Report ACCUMULATE MAINTAIN ACCUMULATE 4.00 DOWN 4.190



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