CapitaLand - Phillip Securities 2021-05-17: More Green Shoots


CapitaLand - More Green Shoots

  • CapitaLand (SGX:C31)'s residential sales powered further ahead. Units sold in 1Q21 in Singapore and China catapulted 3.9x and 3.3x y-o-y. Higher capital recycling lifted total fee income by 9% y-o-y.
  • Retail, office and industrial properties resilient.
  • Lodging recovery stalled by movement restrictions in several countries.
  • Maintain BUY on CapitaLand and target price of S$4.38, based on probability-weighted RNAV and SOTP. We assume 80% probability of approval for demerger.

The Positives

Strong recovery in residential sales.

  • The number of homes sold in 1Q21 in Singapore and China catapulted 3.9x/3.3x y-o-y to 81/1,333 units. Sustained momentum is expected in FY21.
  • In Vietnam, sales were negative due to delays in securing permits for units sold previously and buyers’ return 212 units in FY20. Returned units in 1Q21 eased y-o-y from 48 to eight. Delays in permit issuance are expected to ease after the Vietnamese Communist Party’s central committee was elected on 1 February 2021.

Recovery in fee income on the back of higher capital recycling.

  • Fee income grew 30% y-o-y, lifting total fee income by 9% y-o-y. This was led by higher transactions from improved market sentiment, resulting in higher acquisition/divestment fees and an enlarged base of REIT fund AUM. Fund AUM grew S$1.6bn or 2% q-o-q to S$79.2bn, inching closer to CapitaLand’s 2024 S$100bn target.

Retail, office and industrial properties resilient.

  • Retail occupancy was resilient q-o-q with better tenant sales across its markets. Reversions were still flat to negative single digits.
  • In Japan and South Korea, office occupancy improved from 89.9%/90.9% to 95.5%/98.7% q-o-q. Occupancy in Singapore, China and Germany ranged from -0.3ppt to +1.4ppts q-o-q.
  • Industrial occupancy varied from -2.5ppts in Australia to +1.1ppts in Europe. Average reversions for office and industrial were mostly positive in all the markets.

The Negative

Lodging’s bumpy road to recovery.

  • 1Q21 RevPAU was down 28% y-o-y and 5% q-o-q. Flat to single-digit q-o-q RevPAU growth in Singapore, Australia, Philippines, Indonesia, Thailand and India was wiped out by RevPAU declines in China (-11%), Japan and South Korea (-16%) and Europe (-9%). The reason for North Asia’s and Europe’s declines was movement restrictions to contain the spread of the virus.
  • Despite the long road to recovery, CapitaLand managed to sign 2,800 units year-to-date, increasing the number of keys under management to 123,000. US multifamily portfolio was resilient with occupancy at 94.5%.


  • CapitaLand’s recovery is under threat from new waves of the virus, which have reignited lockdowns across the globe. This will have knock-on effects on its operating segments. A pick-up in the transaction market has allowed CapitaLand to divest S$2.7bn of AUM year-to-date, bringing it closer to its S$3bn annual divestment target.
  • Lodging AUM and fund AUM will continue to provide growth. On its lodging platform are 52,900 units (30% of the 123,000 signed units) that are expected turn operational in the next three years. Once operational, they will begin contributing to earnings.
  • CapitaLand is also pursuing a China renminbi fund management licence that will allow it to raise Chinese equity, a previously untapped source of capital. This could be a catalyst for its private fund AUM growth.

Maintain BUY and probability-weighted RNAV target price of S$4.38

Natalie Ong Phillip Securities Research | https://www.stocksbnb.com/ 2021-05-17
SGX Stock Analyst Report BUY MAINTAIN BUY 4.380 SAME 4.380