Promising start to the year. Excluding portfolio and revaluation gains, CapitaLand’s 1Q13 operating PATMI came in largely within expectations at SGD133.3m (+20% YoY, +70% QoQ). More importantly, residential sales in the quarter were stepped up in both Singapore and China, while CapitaMalls Asia also delivered growth. We believe the sharpened focus in Singapore and China will underpin CapitaLand’s growth going forward. Maintain BUY.

Ramping up sales to meet homebuyers’ demand. In 1Q13, CapitaLand sold 544 homes in Singapore, mainly from units at d’Leedon. This accounted for ~10% of market share in the primary market and almost 10x the number of homes it sold in 1Q12. In China, CapitaLand sold 955 units in 1Q13, up from 255 in 1Q12. New units were launched at The Loft in Chengdu and Dolce Vista in Guangzhou during the quarter. To date, >400 units have already been sold at these two projects with a combined sales value of RMB4.3b.

Healthy pipeline of projects. CapitaLand is targeting to launch the 124-unit freehold project at Marine Point and the new 694-unit project adjacent to Sky Habitat in Bishan in 2H13. In addition, we expect management to capitalize on the recent interest to roll out the remaining units at d’Leedon and The Interlace. In China, CapitaLand has another ~3,500 units valued at around RMB5b which will be launch-ready this year. Notwithstanding the healthy pipeline, CapitaLand will continue to source for sites to replenish its land bank.

Prudent capital management. With a net gearing of 0.44x and SGD5.4b in cash, we believe CapitaLand remains well-capitalised to capture growth opportunities. In addition, the possible divestment of its 60% stake in Australand remains on the cards should an attractive offer come along, which will return more capital for redeployment. Maintain BUY. CapitaLand’s diversified business model has shone through this quarter and we are positive on the sharpened focus under the new streamlined organizational structure. Maintain BUY with a target price of SGD4.33, pegged to 20% discount to RNAV.

Source: Maybank Kim Eng Research - 29 Apr 2013