Capitaland

Capitaland: 2Q14 results were broadly in line, with net profit at $438.7m (+14.5%) taking 1H14 net profit to $621.5m (+9.2%). Excluding portfolio and revaluation gains, CapitaLand’s core net profit was higher at $136.5m (+30.7%). Revenue fell 13.2% to $875.3m, weighed by lower contributions from the group’s S’pore operations (-20.9%) as sales from Urban Resort Condominium and The Interlace tapered off after obtaining TOP in 2013, as well as lower progressive revenue from Bedok Residences and loss of rental revenue from Technopark@Chai Chee which was divested off. This was partly mitigated by revenue recognition from Sky Habitat and higher rental income from CapitaCommercial Trust. Elsewhere, the group saw lower revenue from CapitaLand China (-38.0%), mainly due to lower number of residential units being handed over from projects held through subsidiaries. The main contributor to 2Q14 China’s revenue was iPark in Shenzhen. Contributions from CMA was down 5.4%, attributable to lower progressive recognition for Bedok Residences, while Serviced residences’ revenue increased by 8.0% due to improved operating performance of properties in Europe, as well as contribution from newly acquired properties in China and Japan. Collectively, the two core markets of Singapore and China accounted for 72.9% (2Q13: 81.5%) of the group’s revenue. Other operating income rose 4.5% to $241.2m, due largely to fair value gains of $208.3m on the group’s properties in China, Malaysia and Europe. Meanwhile, contributions from associates and JVs climbed 6.1% to $374.7m, led by better operating performance of projects held by associates in China, partially offset by lower net fair value gains from revaluation of investment properties in China. Going forward, the group plans to launch ~7,500 residential units in China over the next six months in 2H14, while its Singapore’s Marine Blue Condominium is expected to be launch-ready in 2014. Overall, CapitaLand remains positive on its prospects and aims to harness its key strengths across its various businesses to create differentiated real estate projects and enhance overall project returns, with Singapore and China remaining as the group’s core markets. Balance sheet remained fairly sound with net gearing at 58.0% and valuations are undemanding at just 0.92x P/B.