CapitaLand

CapitaLand: 3Q14 results were broadly in line, with net profit at $130.0m (+1.3%) taking 9M14 net profit to $751.5m (+7.7%). Excluding divestment, revaluation and impairments, CapitaLand’s core net profit was at $129.5m (+37.0%), driven by higher contribution from the shopping mall business, development projects in China and Vietnam, and lower finance costs. Overall revenue fell 4.3% to $918.9m, dragged by China operations, with revenue down 44.4% to $170.0m, as the units handed over in previous corresponding periods were from projects that have higher ASP, in particular, The Paragon. EBIT for China was however up 41.3% to $69.2m, led by higher associate and JV contributions, and reversal of cost accruals upon finalisation. Revenue from Singapore gained 17.3% to $358.8m, due to higher contribution from Sky Habitat and the commencement of revenue recognition for Sky Vue, partially offset by decreased sales from The Interlace after obtaining TOP in 2013, and the absence of rental income from TechnoPark@Chai Chee (divested in Nov ’13). EBIT for Singapore however fell 23.6% to $99.5m, as a result of lower contribution from development projects. Collectively, Singapore and China accounted for 75.7% of the group’s total revenue. Revenue from CapitaMalls Asia was up 16.5% to $173.6m, led by higher rental revenue from Bedok Mall and Westgate which opened in Dec ’13, and improved performance from malls in China. Meanwhile, revenue from serviced residences (Ascott) advanced 6.7% to $179.0m, due to contributions from newly acquired properties in China and Japan as well as improved operating performance of properties in Europe. Other operating income fell 65.1% to $21.9m, due largely to the absence of fair value gains of investment properties from the previous year, and a 52.7% drop in interest income. Meanwhile, contributions from associates and JVs inched down 1.6% to $123.9m, with better operating performance of China funds and development projects, offset by the absence of a portfolio gain of $16.4m which was recognised in 3Q13 from the divestment of the group’s interest in three UK investment properties. Bottom-line was also weighed by a 53.7% rise in taxation expense to $47.5m, due to the utilisation of tax credits which resulted in a lower taxable income for the previous year. 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 60% and valuations are undemanding at just 0.85x P/B.