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Property News27 Apr 2017

Nassim bulk sale helps CapitaLand post 77% jump in Q1 gain to S$386m

The Nassim

CAPITALAND Ltd achieved a 77.2 per cent jump in net profit to S$386.8 million for the first quarter ended March 31, aided by divestment gains.

Giving a fillip to the quarterly reults was a S$160.9 million gain from the sale of 45 units at The Nassim, a luxury condominium project near Orchard Road, to one of Singapore's richest men and veteran banker Wee Cho Yaw in January.

Group revenue for the quarter grew a marginal 0.4 per cent from a year ago to S$897.5 million as the higher handovers from development projects in China and rental contribution from newly acquired properties were offset by lower revenue from development projects in Singapore.

CapitaLand also enjoyed a surge in portfolio gains to S$17.7 million from S$2.9 million a year ago, mainly from the divestment of a township project Central Park City in Wuxi.

Group president and CEO Lim Ming Yan said the group will complete and commence this year six more shopping malls in China, India, Malaysia and Singapore, as well as the retail components of three Raffles City developments and Capital Square in China. Five of these 10 shopping malls and retail components will open in the second quarter.

Pre-lease commitments of more than 90 per cent has been secured for the retail components of Raffles City projects in Changning, Hangzhou and Shenzhen.

"This will add to the steady leasing income generated from our four operating Raffles City projects," Mr Lim said. "Raffles City Chongqing is also on track for completion in phases starting from 2018. As more of our properties become operational, our recurring income will grow."

In China, the group is also looking to enhance its retail scale and network through acquisitions and management contracts.

Some property analysts were encouraged by the strong pre-leasing demand ahead of the malls' opening; those from JPMorgan, Deutsche Bank and Citi kept their "overweight" or "buy" calls. Shares of CapitaLand rose 1.4 per cent to S$3.72 on Wednesday.

JPMorgan analyst Brandon Lee noted that the stock is still trading at an undemanding discount of 35 per cent to revalued net asset value (RNAV) amid improving fundamentals of China retail and an expected pick-up in accretive acquisitions.

The group's recent participation in a residential land tender at Toh Tuck Road is also an indication that it may be more prepared now to re-enter this sector compared to 12 months ago, he said.

RHB Research analyst Vijay Natarajan, who has a "neutral" call, noted that one key catalyst in the near term could be the potential acquisition of Asia Square Tower 2. But the risk of overpricing the asset, potentially at more than S$3,000 psf, could weigh on the share price, he said.

During the first quarter, CapitaLand sold about 83 residential units in Singapore worth S$497 million, down from 222 units for S$506 million in Q1 2016, and 2,062 units in China at 3.8 billion yuan (S$770 million) compared to 3,377 units at 4.5 billion yuan in the year-ago period.

Still, earnings before interest and tax (Ebit) from CapitaLand Singapore surged 157.8 per cent to S$253 million mainly due to gain from the sale of units at The Nassim and higher office rental income. The Ebit from CapitaLand China also grew 66.6 per cent to S$147.3 million, bolstered by higher divestment gains.

The other business unit CapitaLand Mall Asia posted a 1.3 per cent rise in Ebit to S$147.1 million mainly due to the newly acquired office and retail assets in Japan. Strong tenant sales growth of 12.6 per cent (or 5.2 per cent on a per sq ft basis) was registered in China; tenant sales in its Singapore malls dipped 0.3 per cent but rose 0.9 per cent on a per sq ft basis.

A drag in Ebit during the quarter came from serviced residence arm Ascott, where Ebit fell 44.5 per cent from a year ago to S$70.8 million amid lower fair value gains stemming from divestments as well as a foreign exchange loss. Ascott is expected to open about 2,600 serviced residence units this year.

The group said that it expects the outlook for office occupancy and rental to remain muted, while property cooling measures will continue to weigh on the residential market. Still, it will selectively source for new residential sites.

About 94 per cent of its launched residential units in Singapore were sold as of April 23, including 52 per cent of the 124-unit Marine Blue launched in March; some 94 per cent of launched units in China were sold as of end-March.

Over 6,000 units in China that moved for 10.5 billion yuan are expected to be handed over from the second quarter onwards, with about 60 per cent of the value to be recognised in the next nine months, the group said.

The Business Times

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