Thursday, February 27, 2014

CapitaLand - Taking a big bath (CIMB)

Current S$2.91
Target S$3.51
Taking a big bath

▊ 4Q13 was a quarter of kitchen sinking, as impairment and divestment losses resulted in poor headline numbers. Excluding these, core net profit was decent. With Singapore housing making up just a fraction of its GAV, FY14 operational growth will now depend on China sales and CMA. The latter is showing good progress. At the CapLand level, we think ROEs may only accelerate from 2015. CMA’s share price has de-rated recently. Between the two, we now prefer CMA. CapLand’s 4Q13 core profit was in line at 28% of our full year (FY13 at 95%), and 23% of consensus. We lower our FY14-15 core EPS on slower China sales, and cut our target price on a higher 25% discount to RNAV (20% before). Maintain Add on valuations.

Stronger operational numbers (excluding one-offs)
CapLand’s headline 4Q13 result was affected by one-off items like impairment losses (S$165m) and an FX translation loss (S$131m) relating to the divestment of Australand. CapLand has been flushing out impurities from its books in the last few quarters to better position for 2014. Core net profit grew at a strong 58% yoy. Handing over of units in China and a stronger CMA were the drivers. Operational PATMI for FY13 was 62% of total PATMI, a yoy improvement.  
Singapore housing de-emphasised
CapLand sold 1,260 units in Singapore in FY13, up 85% yoy. At the results briefing, management reiterated the fact that Singapore housing now forms less than 10% of its total assets and is thus likely to be less affected by a potential physical price decline. CMA and China remain the key drivers. While overall NPIs for CMA is on an uptrend, its target of a 30% yoy rise in contracted sales at the CL China level could face headwinds in FY14. CapLand sold 611 units in 4Q13, lower than 3Q13’s 707 units and the 1.2k units achieved in 4Q12.  
Focusing on lifting ROEs, bit by bit
In China, it plans to reduce the turnaround time between land purchase and project launch to improve capital efficiency. It is already launching more commercial units for strata sales. It also targets to build smaller-sized units in its core markets to cater for first-time home buyers and upgraders. We think CapLand is making progress, though we expect ROEs to accelerate only from 2015 onwards when more asset completions come on-stream.

Source/Extract/Excerpts/来源/转贴/摘录: CIMB-Research,
Publish date: 19/02/14

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