Wednesday, October 31, 2012

China knocks off Singapore as CapitaLand's stalwart

Only 70 residential units were sold in Singapore in 3Q12.

According to Barclays, CAPL’s 3Q12 earnings were in line with our expectations, with YTD core PATMI up 24% y/y. The key highlight was continued improvement in its China residential projects in 3Q12, with sales up 180% y/y and value +251% y/y.

Here's more from Barclays:

Core earnings in line, all-round growth. CAPL’s 3Q12 reported PATMI came in at S$148.5mn (+85% y/y, -62% q/q), bringing 9M12 PATMI to S$667.6mn (+15% y/y). Stripping out revaluations in 1H12, core 9M12 PATMI of S$435mn (+24%) makes up 74% of our FY12 forecast of S$585mn. Stripping out divestment gains as well, 9M12 PATMI of S$239mn (+22%) makes up 70% of our FY12E of S$343mn.

We expect 4Q12 operating profits to be seasonally stronger. In 3Q12, there was a portfolio gain of S$58.7mn, mainly on divestment of Ascott Guangzhou and Ascott Raffles Place to ART. Revenues rose 13% y/y to S$687mn mainly on better China residential sales (+67%) and CMA (+49%). EBIT rose 41% y/y to S$383mn on growth across all its business units, except CapitaValue Homes which is still in infancy.

Big Positive: China residential sales accelerated in 3Q12. sales gathered momentum in 3Q12 with demand from first time home buyers and upgraders – sold 911 units (+180% y/y) and value of RMB2.0bn (+251% y/y); doubling the pace in 1H12 during which 1,067 units (RMB2.2bn) was sold.

This brings YTD sales to 1,978 units (+61% y/y) and value RMB4.2bn (+75% y/y). However, revenues and EBIT recognised lagged the presales so far as these are recognised on delivery. We expect stronger accounting recognition from FY13 with more Shanghai completions.

A negative: Singapore residential presales slowed. For Singapore residential, CAPL sold 70 units for a value of S$166mn in 3Q12, slower than the 259 units (S$467mn) in 1H12, bringing YTD sales to 329 units (S$633mn).

Plans to launch 70 units in Sky Habitat at Bishan (already launched 180 of 509 units) in Oct, and a further 300 units in d’Leedon (has launched 928 of total 1,715 units) in Nov. We have expected Singapore sales for CAPL to pick up only in the medium term given their premium pricing.

Management expects growth in China residential, office, Singapore and China retail. Management expects capital investments made over two years to bear fruit, and residential sales value to be strong despite government policies given continued momentum.

It also expects China's office sector to be robust, particularly in Beijing and Shanghai; it has stakes in successful office/retail integrated projects Raffles City Shanghai, Beijing which are doing well; Ningbo and Chengdu just opened in 3Q12 and will be opened in phases in next few quarters. 

Martin Koh | 86666 944 | R020968Z
Sherry Tang | 9844 4400 | R020241C
Senior Sales Director
DTZ Debenham Tie Leung (SEA) Pte Ltd (L3006301G)

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