CapitaLand

CapitaLand: CapitaLand 4Q14 results beat estimates, as net profit surged 187% y/y to $409.4m, bringing FY14 earnings to $1.16b (+38%).

Excluding divestment, revaluation and impairments gains/losses, CapitaLand’s core net profit rose 54% to $283.6m, driven by improved operating performance from its shopping mall business and development projects in Vietnam and profit from the sale of Westgate Tower, as well as lower funding costs.

For the quarter, revenue grew 67% to $1.52b, mainly boosted by the consolidation of CapitaMalls Asia (CMA), which sold all the office strata units in Westgate Tower, as well as higher revenue from shopping mall and serviced residence businesses and development projects in Singapore, but partially offset by fewer handover of units from development projects in China.

Collectively, Singapore and China accounted for 82.3% of overall revenue (4Q13: 75.1%).

Singapore's revenue improvement of 72% also gained from higher contribution of Sky Habitat, commencement of recognition for Sky Vue and higher rental revenue from CapitaCommercial Trust, Westgate and Bedok Mall. This was partially offset by the lower contribution from The Interlace and Urban Resort Condominium after obtaining TOP in 2013, as well as absence
of rental income from TechnoPark@Chai Chee which was divested in Nov 2013.

In China, revenue fell 21% as lower units were sold (-12% to 1,673), although sales value rose 50% to Rmb3.3b. Century Park (Chengdu), achieved a healthy sales rate of ~45% since its launch of 232 units in Nov 2014. Meanwhile, Raffles City Hangzhou sold one-third of its strata office area (about 23,800 sqm) since its launch in Dec 2014.

The bottom line was boosted by better operating performance, higher fair value gains from investment properties (+6%) and absence of losses incurred on repurchase of convertible bonds in 4Q13, but dragged by higher provision ($91.8m) in light of the challenging market conditions in Singapore.

Meanwhile, balance sheet got stretched from the privatisation of CMA, which brought net gearing to 57% (FY13: 39%).

Management proposed a first and final DPS of 9¢, higher than the 8¢ in FY13.

Going forward, group expects the private residential environment in Singapore to remain challenging, weighed by the total debt servicing ratio and concerns over interest rate hikes. The office segment is likely to be healthy, supported by limited new supply in 2015 and growing rents. The rate of growth, however, will depend on demand against the new supply which will come on-stream from 2H16.

China's residential sales should be improved, given the recent cut in benchmark loan rates and PBOC's relaxation of home purchase restrictions in second and third tier cities. Three new projects, namely Riverfront (Hangzhou), Summit Era (Ningbo) and Vermont Hills (Beijing) are expected to be launch-ready in 2015. Total units available will collectively yield ~9,000 units, which will be released for sale according to market conditions.

At $3.36, CapitaLand is valued at 0.92x P/B.