CapitaLand - CGS-CIMB Research 2020-11-04: Signs Of Recovery

CAPITALAND LIMITED (SGX:C31)

CapitaLand - Signs Of Recovery

CapitaLand's 3Q20 operating metrics improved q-o-q across its business segments.
CapitaLand has locked in c.S$1.1bn of assets divestment year-to-date; it maintains a target of S$3bn for FY20F.
Reiterate ADD rating with an unchanged Target Price of S$3.42.

CapitaLand (SGX:C31) showed q-o-q improvements in its 3Q20 operating metrics across all business segments, particularly in residential, retail and lodging. Fee income was marginally higher q-o-q, but 18.1% lower y-o-y due to reduced transaction fees as activities slowed.
Financial and liquidity positions remains robust, with cash and available undrawn facilities of c.S$14.6bn, and a debt/equity ratio at 0.64x. Year-to-date divestments totaled S$1,085.8m and management continues to maintain its S$3bn target for FY20F.
Looking ahead, CapitaLand has indicated that it would continue to look for opportunities to reposition for growth in its three pillars of development, lodging and fund management. It remains disciplined with capex, cost controls and workforce optimisation, the company said. Its strategic priorities include plans to elevate its sustainability leadership and accelerating digitalisation and tech innovation to future-proof its businesses, CapitaLand added.

Residential sales delivered a strong recovery, with 3Q Singapore sales reaching 3x the 35 units sold in 1H20. New units at One Pearl Bank and Sengkang Grand Residences have been released for sale.
In China, it saw residential sales of over 1,900 units in 3Q, 40% higher than previous quarter. Value of handovers for year-to-date Sep 2020 has exceeded the same period last year, and more units are scheduled to be handed over in 4Q20F.
In Vietnam, year-to-date Sep 2020 handovers tripled that achieved in the same period last year, while sales in 3Q20 were double the amount in 1H20.

Retail operations improved on a q-o-q basis across China, Japan, Singapore and Malaysia, with committed occupancy staying relatively stable at 87.9-99.8%. On a year-to-date Sep 2020 basis, tenant sales were 15-31% below those of last year, while shopper traffic was 22-42% below last year’s.
The office, business parks, industrial & logistics segment maintained positive rental reversions year-to-date. The group divested ICON Yeoksam, an office property in Seoul, for KRW142.2bn or 16.9% above valuation in Aug 2020.
Within the lodging segment, 96% of its properties were operational in 3Q, with overall occupancy higher at 50%. RevPAU increased 22% q-o-q. It has also enjoyed record signings of over 5,600 new units across 26 properties in China year-to-date.

We leave our FY20-22F EPS estimates unchanged and maintain our RNAV/Target Price of S$6.22/S$3.42 (45% discount from RNAV). We believe that CapitaLand’s resilience is enhanced through its diversified business model and it remains our top pick in the property sector.
See CapitaLand Share Price; CapitaLand Target Price; CapitaLand Analyst Reports; CapitaLand Dividend History; CapitaLand Announcements; CapitaLand Latest News.
Upside catalysts: faster-than-expected pace of asset divestment and capital recycling.
Downside risk: slower-than-expected recovery from COVID-19 impact.

LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2020-11-04

SGX Stock Analyst Report ADD MAINTAIN ADD 3.420 SAME 3.420