CapitaLand

DBS Group Research, Feb 20

CAPITALAND's results were in line with our expectations, but slightly below street consensus. Q4 revenue was 2 per cent y-o-y lower at S$1,085.1 million, while reported net profit dropped 46 per cent to S$142.9 million.

However, stripping one-offs such as impairments, losses from partial divestment of Australand stake and repurchase of convertible bonds, and revaluations, operating Patmi (profit after tax and minority interests) would have been S$190.7 million, up 72 per cent y-o-y. For the full year, operating Patmi was up 42 per cent to S$527.7 million. The group has proposed a dividend per share (DPS) of eight cents, up from seven cents last FY.

Highlights of FY2013 performance include higher residential volume sales in Singapore, where 1,260 units were sold, valued at S$2.44 billion, as well as the handover and recognition of profits from 8,365 units in China with a sales value of 11.2 billion yuan (S$2.3 billion). Other units such as CMA and Ascott also performed better.

Going forward, the group would continue to emphasise growing operational profitability and strategy execution through active capital management and improving capital productivity across its four core business units. It would continue to focus on its core markets of Singapore and China, particularly on integrated developments. In Singapore, it is slated to launch new developments in Marine Parade and a landed project at Coronation Road as well as the unsold units from earlier projects. It also has an unsold inventory of 3,200 units and another 14,000 homes in China that are ready for launch.

Apart from the above, plans to manage finance cost, currently at 4 per cent, as well as recycling mature non-core assets, are on the cards. With the paring down of its stake in Australand and subsequent deconsolidation, the group's gearing stands at 34 per cent with an average debt maturity of 3.6 years. This puts the group in a strong position to look for new investment opportunities, especially in its core markets.

Maintain "buy". The stock is currently trading at a steep 47 per cent discount to its RNAV of S$5.57. Our target price of S$3.90, premised on a 30 per cent discount to asset backing, offers significant 32 per cent upside.

BUY