Highlights Cleaning up activities. Capitaland’s results were in line with our expectations but slightly below street concensus. 4Q revenue was 2% y-o-y lower at S$1085.1m, while reported net profit dropped 46% to S$142.9m. However, stripping one-offs such as impairments, losses from partial divestment of Australand stake and repurchase of CBs, and revaluations, operating PATMI would have been S$190.7m, up 72% y-o-y. For the full year, operating PATMI was up 42% to S$527.7m. The group has proposed a DPS of 8Scts, up from 7Scts last FY.
Focus on delivering operational performance. Highlights of FY13 performance include higher residential volume sales in Singapore, where 1260 units were sold, valued at S$2.44bn, as well as the handover and recognition of profits from 8365 units in China with a sales value of Rmb11.2bn.Other units such as CMA and Ascott also performed better.
Our View
Deepening presence in core Singapore and China. Going forward, the group would continue to emphasise on growing operational profitability and strategy execution through
active capital management and improving capital productivity across its 4 core business units. It would continue to focus in its core markets of Singapore and China, particularly on integrated developments. In Singapore, it has slated to launch new developments in Marine Parade and a landed project at Coronation Road as well as the unsold units from earlier projects. It also has an unsold inventory of 3200 units and another 14,000 homes in China that are ready for launch.
Strong balance sheet. Apart from the above, plans to manage finance cost, currently at c.4%, as well as recycling mature noncore assets are on the cards. With the paring down of its stake in Australand and subsequent deconsolidation, the group’s gearing stands at 34% with an average debt maturity of 3.6 years. This puts the group in a strong position to look for new investment opportunities, especially in its core markets.
Recommendation
Maintain Buy. The stock is currently trading at a steep 47% discount to its RNAV of S$5.57. Our TP of S$3.90, premised on a 30% discount to asset backing, offers significant 32% upside. Maintain Buy.
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