CapitaLand

OCBC on 2 Aug 2012

CapitaLand (CAPL) announced 2Q12 PATMI of S$385.9m - down 3.3% YoY. Adjusting for revaluations and impairments, we estimate core PATMI at S$179.5m, which is broadly in line with expectations. In China, residential units sold leaped 218% QoQ to 812 units as buyer sentiments rebounded somewhat. Management indicates they had increased prices in the 4%-5% range, and expects to launch about 4k units in China this year (unchanged from 1Q12 guidance). 202 residential units were sold in Singapore over 2Q12 (57 in 1Q12) with most of the QoQ increase due to the Sky Habitat launch in Apr 12. We think CAPL’s valuations remain undemanding, and continue to favor its sound balance sheet with S$5.1b in cash and net gearing of 0.41. Maintain BUY with a higher FV estimate of S$3.32 (25% RNAV disc), versus S$3.25, as we update valuations of its listed holdings.

2Q12 numbers broadly in line
CapitaLand (CAPL) announced 2Q12 PATMI of S$385.9m - down 3.3% YoY. Adjusting for revaluations and impairments, we estimate core PATMI at S$179.5m, which is broadly in line with expectations. One-time gains for the quarter include S$89.2m of portfolio gains, mostly from the divestment of 50% stakes in two shopping malls, and S$206.5m of revaluation gains/impairments. Top-line for the quarter came in at S$862.5m, climbing 16.5% YoY mainly due to stronger contributions from residential developments and shopping malls.

Chinese residential sales tracking faster
In China, residential units sold increased 218% QoQ to 812 units as buyer sentiments rebounded somewhat. The Phase 3 launch of Beaufort (Beijing) in May 12 turned in good numbers, selling >61% of units launched. Management indicates they had increased prices in the 4%-5% range, and expects to launch about 4k units in China this year (unchanged from 1Q12 guidance). 202 residential units were sold in Singapore over 2Q12 (57 in 1Q12) with most of the QoQ increase due to the Sky Habitat launch in Apr 12. Sales conversion at major projects d’Leedon and Interlace remain muted, through the group plans to launch more units in 2H12.

Unabated appetite for retail mall expansion
CMA, the group’s retail mall subsidiary, saw its 2Q12 PATMI of S$235.8m increase 31.4% YoY; accounting for one-time items, however, core earnings was somewhat below view due to a slower than expected Chinese rental income ramp-up. That said, 1H12 shopper traffic and tenant sales (psf) in Chinese malls were up 10.7% and 11.6% YoY respectively, underscoring still healthy retail conditions. Recent mall acquisitions in Tokyo and Qingdao, China, points to an unabated appetite for retail mall portfolio expansion.

Maintain BUY
We think current valuations remain undemanding, and continue to favor its sound balance sheet with S$5.1b in cash and net gearing of 0.41. Maintain BUY with a higher FV estimate of S$3.32 (25% RNAV disc), versus S$3.25, as we update valuations of listed holdings.