CapitaLand - CGS-CIMB Research 2021-02-24: Looking At A Better FY21

CAPITALAND LIMITED (SGX:C31)

CapitaLand - Looking At A Better FY21

CapitaLand's FY20 net loss of S$0.305/share was below our estimates but in line with market expectations.
H-o-h recovery across its portfolio indicates a potentially better FY21F.
Maintain ADD with an RNAV-based target price of S$3.42.

CapitaLand (SGX:C31); posted a net loss of S$1.67bn/S$1.57bn for 2H20/FY20, dragged by revaluation deficits of S$1.6bn on investment properties and S$861m worth of impairments of projects and equity investments, lower performance from shopping malls and lodging businesses and partly offset by higher residential contributions.
CapitaLand's FY20 net loss came in at S$1.57bn. Excluding impairments and revaluation deficits, operating PATMI would have been S$769.9m, -27.2% y-o-y.
CapitaLand proposed final dividend of S$0.09 per share, translating to a payout ratio of ~52% of FY20’s cash PATMI of S$924m.

In terms of operations, contributions from CapitaLand's residential development in China improved y-o-y on the back of a 28% y-o-y higher handover value of RMB15.8bn. It has a remaining RMB10.5bn of sales, as at end-Dec 2020, to be settled from 1Q21 onwards.
In Vietnam, CapitaLand sold S$272m worth of properties, of which 43% is expected to be recognised in FY21F.
In Singapore, sales performance was better h-o-h in 2H20, with 94% and 83% of launched units at Sengkang Grand Residences and One Pearl Bank taken up to date, respectively. The residential portion of Liang Court redevelopment is likely to be launch-ready in 2H21.

Within CapitaLand's retail malls business in China, Singapore and Malaysia, occupancy remains healthy at 88-98% while tenant sales for Singapore and China malls have trended back to close to 2019 levels even though shopper traffic is still 13.8%-22% lower y-o-y.
CapitaLand's office, business parks and industrial/logistics portfolios remained resilient in 4Q20 and the group is well placed to offer core/flex workspace solutions for its tenants.
While the recovery pace of the lodging business varied across markets, it continues to sign new management units in 2020 and plans to open a further 17k units in 2021F.

Looking ahead, CapitaLand maintains its three growth pillars of
1. development as it continues to pivot into new economy asset classes such as business parks, logistics and data centres,
2. fund management through scaling growth in its REIT vehicles and aims to grow its funds AUM to S$100bn by 2024F, as well as
3. continuing to expand its lodging business.
CapitaLand maintained its annual asset divestment target of S$3bn for FY21F and has announced S$488m worth of divestments year-to-date.
Net debt to equity ratio stands at 0.68x, at end-FY20, with S$15.3bn of cash and available undrawn facilities, providing CapitaLand with a strong balance sheet to achieve its growth targets.

We cut our CapitaLand's FY21-22F earnings per share forecast by 20.7%-23.5% as we push back residential recognition and impute slower rental recovery as well as tweak up overall expenses. However, our RNAV remains stable at S$6.22.
Our target price of S$3.42 for CapitaLand is pegged to an unchanged 45% discount to RNAV.
See CapitaLand Share Price; CapitaLand Target Price; CapitaLand Analyst Reports; CapitaLand Dividend History; CapitaLand Announcements; CapitaLand Latest News.
Catalyst for CapitaLand's share price is a faster-than-projected pace of asset recycling.
Downside risks include slower-than-expected macro outlook.

LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2021-02-24

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