Capitaland

Capitaland’s 1Q14 results were broadly in line, with net profit at $182.8m (-1.7%) on revenue of $612.6m (-3.4%). Excluding portfolio and revaluation gains, CapitaLand’s core net profit was at $155.7m (+29.9%). Revenue was weighed by lower contributions from the group’s S’pore operations (-37.7%) as sales contributions from Urban Resort Condominium and The Interlace tapered off after obtaining TOP in 2013. This was mitigated by revenue recognition from Sky Habitat and Bedok Residences, and rental income from CapitaCommercial Trust. The decrease was mitigated by higher revenue from CapitaLand China (+56.2%), higher contribution from CMA (+42.3%), as well as higher sales from development projects in Vietnam. Serviced residences’ revenue increased by 8.2% due to improved operating performance of properties in Indonesia, Vietnam and Europe, as well as contributions from newly acquired properties in 2Q13. Other operating income fell 54.4% to $47.4m, aided largely by a divestment gain of $58.5m from the sale of a subsidiary in Dong Cheng, Beijing in the corresponding period. Meanwhile overall associate and JV contributions were up 9.8% to $140.4m due to higher contributions from two associates in China and a general improvement in operating performance of CapitaLand’s REITs and China funds. Operationally CapitaLand Singapore sold 34 residential units in 1Q14 (1Q13: 544 units), although Apr ’14 saw 106 units of Sky Habitat sold following a marketing campaign. In China, 1,177 residential units were sold in 1Q14 (1Q13: 2,249 units), mainly from La Botanica in Xi’an, The Loft in Chengdu, The Metropolis in Kunshan and The Paragon in Shanghai. The group guides to launch ~8,000 residential units in China over the next nine months in 2014, while its Singapore’s Marine Blue Condominium is expected to be launch-ready in 2014. Going forward, 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 sound with net gearing at 37.0% and valuations are undemanding at just 0.84x P/B. Latest broker ratings: CIMB maintains Add with TP $3.83 CLSA downgrades to U/p from O/p with TP $3.18