Monday, July 29, 2013

CapitaLand : What’s core and what’s not (CIMB)

Current S$3.22
Target S$3.91
What’s core and what’s not

 The restructuring theme seems to have stalled with the failed sale of Australand. However, this does not change CapLand’s plan to inject excess capital into its core segments. Operational improvement is now the main focus, which we believe, is gradually showing in its results.

1H13 core EPS was in line with expectations, at 51% of our FY13 estimate and % of consensus. The bulk of its China completions will materialise in 4Q13. By adjusting our recognition schedule, FY13-15 core EPS changes by -10-2%. We reduce our target price (still at 20% discount to RNAV) to factor in Australand’s lower share price. We maintain our Outperform call with operational improvement as a catalyst.

Results review
CapLand’s 2Q13 core EBIT was up by 11% yoy with core PATMI up 21% yoy due to lower interest costs. While there was a boost from the higher SG and China sales recognitions, there was operational improvement across the board (for example, CMA). However, China registered lower margins due to the higher cost of sales for certain projects, which are not recurring in nature according to management. We expect 4Q13 to be the strongest quarter in FY13 as over 90% of the c.1.9k units in China (76% sold) will be handed over in 2H13 and recognised in 4Q13.

China and SG sales
CapLand sold 736 units in China despite launching only 600 units in 2Q13. 1H13 China sales (1.7k units) rose 58% yoy. It is preparing to launch 1.4k units in 2H13, which will drive FY14-15 profits. SG sales in 1H13 also rose 164% yoy. CapLand will be launching Marine Point and Bishan St 14 in 2H13.

What’s core and what’s not
Things are status quo for Australand, with CapLand stating that it will remain a key investment. The company emphasised that it will remain focused on injecting the bulk of its capital into its core markets. It also raised its stake in StorHub, a small self-storage business previously deemed as non-core. We think that CapLand is now biding its time and attempting to raise the profitability of these businesses in view of divesting them in the future at better pricing.

Source/Extract/Excerpts/来源/转贴/摘录: CIMB-Research,
Publish date: 25/07/13

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