Target price:SGD4.10 (unchanged)
Expect a Stronger 4Q
Decent 3Q, but expect a stronger last quarter. CapitaLand reported a core 3Q13 PATMI of SGD101.8m (-6% QoQ; +13% YoY), taking 9M13 core PATMI to SGD343.1m. Although this is merely 50% of consensus full-year estimate, it was in line due to the expected stronger 4Q with the completion of a number of residential projects in China. Valuation remains attractive, in our view, and we reiterate our BUY recommendation and TP of SGD4.10.
Healthy residential sales in Singapore. In terms of actual home sales, CapitaLand did well and sold 468 units in 3Q13, valued at SGD600m. The bulk came from Sky Vue in Bishan, where 433 units have been sold out of the 505 units launched (total 694 units). The median price achieved was SGD1,400 psf, which suggests a pre-tax margin of ~19% based on our estimated breakeven price of SGD1,175 psf. YTD, CapitaLand has sold 1,151 homes in Singapore valued at SGD2.2b (+248% YoY).
China home sales flattish, but healthy. In China, CapitaLand sold 707 homes valued at CNY1b in 3Q13, taking 9M13 sales to 2,398 units (+21% YoY) worth CNY4.2b (+1% YoY). The average sell-through rate is a healthy 78% and CapitaLand could possibly launch another ~650 units in 4Q13, worth an estimated CNY1.7b. CapitaLand will also be handing over some 1,800 completed units in 4Q13 from projects such as Beaufort in Beijing, which will underpin stronger profits in 4Q13.
Targeting more integrated developments. Developing integrated and mixed developments (such as those branded under Raffles City) is evidently one of CapitaLand’s strengths, and management stated that this will be its main focus going forward. CapitaLand has the balance sheet to do so, with a cash balance of SGD5.6b and a comfortable net gearing of 0.44x.
Reiterate BUY. Our TP of SGD4.10, pegged to a 20% discount to our RNAV estimates - in line with its average P/RNAV since 2007. At current levels, the stock is attractively priced at one standard deviation below its P/RNAV mean since 2007.