SINGAPORE (Nov 22): Despite a change of analyst, Phillip Capital is maintaining CapitaLand at “accumulate” with a lower target price of $4 compared to $4.19 previously, translating to a FY18E P/NAV ratio of 0.72 times.

This comes after the real estate developer recently released its 3Q18 results where earnings rose 13.6% on-year to $362.2 million on lower costs and expenses, and in line with the research house’s forecasts.

In a report last Friday, analyst Tara Wong says she remains positive on CapitaLand as management is expecting 4Q18 to be a bumper quarter, stemming from healthy China residential pre-sales with over 90% takeup rates in 4Q18 launches so far.

The analyst continues to like CapitaLand for its healthy portfolio tenant sales growth, plans to bump up recurring income, and active capital redeployment.

“Launched units in 4Q18 YTD saw >90% takeup rates for La Botanica, The Metropolis, The Lakeside, and Parc Botanica. Healthy momentum is expected to persist for the remaining about 1850 units in 4Q18, the release of which will be subject to regulatory approval. Recurring income from investment properties ( about 80% of total assets) is stable and grounded on healthy operating metrics,” says Wong.

In her view, CapitaLand’s recent investments – such as in a $1.1 billion portfolio of US multifamily properties and a 70% stake in Indonesian hotel operator Tauzia – are in line with the group’s aim of adding $10 billion assets under management AUM) by 2020, and its overall portfolio reconstitution strategy.  

Wong also highlights the property group's Singapore and China retail portfolios’ same-store tenant sales growth year to date, having clocked 2.2% and 20.9% y-o-y tenant sales growth in 9M18, respectively.

“Acquisition of two prime residential sites in Guangzhou, which will yield c.1300 units by 2021, closely follows the acquisition of a mixed-use site in Chongqing. In Singapore, CapitaLand had successfully acquired (JV with City Developments) the Sengkang Central mixed-use site for $778 million. Fair value gains of $131.5 million were also recognised from the divestment of CapitaLand’s 70% stake in Westgate,” she notes.

As at 2.56pm, shares in CapitaLand are trading flat at $3.11 or 0.72 times FY18E book value.