CapitaLand

OCBC on 2 May 2012

CapitaLand’s 1Q12 PATMI came in at S$133.2m, up 31% YoY mostly due to divestment gains from the Hilton Double Tree Hotel in Kunshan and revaluation gains for three Japanese malls. Adjusting for one-time items, we estimate 1Q12 PATMI at S$78.4m, which was broadly in line with expectations. An anemic 189 residential units were sold in China over 1Q12 - much in line with the pace seen in 4Q11 (161 units). In Singapore, we saw 57 homes sold in 1Q12 and expect a bump next quarter from Sky Habitat sales (launched Apr 2012, 125 units sold on opening weekend). Retail mall subsidiary CMA’s earnings was somewhat below expectations due to higher operating expenses and a slower-than-expected ramp-up at new malls. Given latest data-points, we now expect Chinese residential curbs to stay in place for most of FY12 and that additional property curbs in Singapore are likely. We pare our fair value estimate to S$3.21 (from S$3.40 previously) mostly due to updated valuations for listed entities, and lower ASPs for residential developments. Maintain BUY.

Boost from one-time gains
CapitaLand Ltd’s 1Q12 PATMI came in at S$133.2m, up 31% YoY mostly due to divestment gains from the Hilton Double Tree Hotel in Kunshan and revaluation gains for three Japanese malls. Adjusting for one-time items, we estimate 1Q12 PATMI at S$78.4m which is broadly in line with our expectations. 1Q12 topline came in at S$641.1m - up 4.8% YoY mainly from higher revenues from development projects in Singapore and Australia, partially offset by lower residential sales in China.

Drag from Chinese sales continues
An anemic 189 residential units were sold in China over 1Q12 - much in line with the pace seen in 4Q11 (161 units). Only 65% of launched units are sold to date, underscoring the challenges from continued residential curbs in China. We believe the group would adopt a wait-and-see stance with regards to launches ahead. In Singapore, we saw 57 homes sold in 1Q12 and expect a bump next quarter from Sky Habitat sales (launched Apr 2012, 125 units sold on opening weekend).

CMA ramp-up somewhat lower than expected in 1Q12
Retail mall subsidiary CMA reported 1Q12 PATMI of S$66.8m, up 36.1% YoY mainly due to revaluation gains (S$30.7m). This was somewhat below expectations due to higher operating expenses and a slower-than-expected ramp-up at new malls. We continue to see good QoQ growth in NPI yields on cost, however, across the Chinese portfolio. CMA would also acquire a 122k sqm shopping mall in Tiangongyuan south of Beijing, to be completed in 2015, which would cost RMB 2.3b (~RMB19k psm GFA). We judge the price paid to be reasonable but see little RNAV accretion at this juncture.

Maintain BUY at lower S$3.21 fair value estimate
Given latest data-points, we now expect Chinese residential curbs to stay in place for most of FY12 and that additional property curbs in Singapore are likely. We pare our fair value estimate to S$3.21 (S$3.40 previously) mostly due to updated valuations for listed entities, and lower ASPs for residential developments. Maintain BUY.