SINGAPORE (Feb 14): CapitaLand on Tuesday announced 4Q17 earnings dropped 37.8% to $267.7 million from a year ago, bringing FY17 earnings to $1.55 billion, up 30.3% y-o-y, the highest since FY2008.
Revenue for the quarter declined by 34.6% to $1.21 billion, mainly due to lower handover of units for development in China.
EBIT from Singapore and China was $285.5 million and $380.7 million respectively.
The group proposed a final dividend of 12 cents per share for FY17.
Separately, the group also announced that it has acquired Pearl Bank Apartments (PBA) for $728 million.
See: CapitaLand reports 37.8% fall in 4Q earnings to $267.7 mil; acquires Pearl Bank Apartments for $728 mil
Following the announcements, RHB is maintaining its “buy” call on CapitaLand with a target price of $4.20.
Similarly, CIMB is reiterating its “add” call on CapitaLand with a target price of $4.34.
DBS is also keeping its "buy call with a target price of $4.35, while UOB is mainintaing its "buy" call with a target price of $4.30.
The acquisition via a private treaty collective sale marks the group’s comeback in the Singapore residential market after a four-year hiatus.
In a Wednesday report, RHB analyst Vijay Natarajan says, “The acquisition looks well-timed and reasonably priced in our view considering the current intense competition for residential land parcels. We expect a healthy demand due to a limited new supply in the Outram Park area, excellent connectivity (at the doorstep of Outram Park MRT station) and good location attributes.”
DBS analyst Derek Tan in a Wednesday report believes that the group might look to launch a luxury development that could aim to rival that of Wallich come 2H19.
CapitaLand’s management also noted that it is seeing a clear pick-up in demand for its existing launches and would continue to bid prudently for well-located sites.
The group’s FY17 Singapore EBIT surged 74% y-o-y due to gains from the sale of The Nassim, rental income from Asia Square Tower 2 and higher residential sales, largely from Victoria Park Villas.
In a Wednesday report, UOB analyst Vikrany Pandey is optimistic about CapitaLand's Singapore office segment, as it recorded higher office occupanices in the CBD.
The group targets to recycle $3 billion per annum of investment properties annually and re-deploy the capital in higher yielding assets.
On the other hand, the group's management has plans to double Ascott's portfolio to 160,000 units. At as end-2017, it has 72,000 units, and according to Pandey, Ascott is on track to reach 80,000 units in 2018.
Meanwhile, the group is remaining cautiously optimistic on the China market, despite property cooling measures.
FY17 China EBIT grew by 4% y-o-y to $765 million, due to a lower handover of RMB 1.16 billion ($241.4 million) worth of properties.
According to the Natarajan, earnings visibility from China’s residential segment looks bright with about RMB 14.7 billion of unbilled sales, of which 70% of the earnings are expected to be recognised in 2018. The group also has more than 6,000 units, which would be launched this year.
On the retail front, portfolio occupancy remained high at 95-98% while tenant sales grew 1-7% y-o-y in FY17. It also has another seven malls across the region that are due to open in 2019 and beyond.
The group’s China malls (same-store basis) registered healthy NPI growth of 8.6%, backed by tenant sales growth and higher shopper traffic.
In addition, the group sees Vietnam as a potential growth market and plans to further scale-up its presence in residential and commercial segments there.
Residential sales in Vietnam grew 63% y-o-y in FY17 and the group has locked in $718 million of pre-sales as at end-17, of which 44% is expected to be recognised in FY18.
In a Tuesday report, CIMB analyst Lock Mun Yee says, “Although Vietnam accounts for a small 2% of CapitaLand’s real estate AUM, we anticipate this segment to expand in the medium term.”
According to DBS' Tan, the group can sustain a further dividend hike this year, on the back of gains from sale of 20 retail malls to be completed in 1H18, and improving operational performance for recently completed retail malls.
"We continue to see value in CapitaLand as we anticipate strong catalysts in the medium term to drive its share price higher," says Tan.
As at 11.20am, shares in CapitaLand are trading 2 cents higher at $3.54 or 0.78 times FY18 book with a dividend yield of 3.7%.
