• 4Q13 numbers a miss
• Limited SG residential exposure
• FV dips to S$3.50

Marred by divestment and impairment losses

CapitaLand’s 4Q13 PATMI decreased 45.6% YoY to S$142.9m mostly due to divestment losses from its 20% Australand stake, impairments from investments in China, India, Abu Dhabi and Australia and forex losses. FY13 PATMI cumulates to S$849.8m, which fell 9.5% short of our full year forecast, and we judge these results to be below our expectations and consensus. Excluding one-time items, however, operating PATMI for FY13 stands at S$527.7m, which is a respectable 42.9% increase but still short of expectations. 4Q13 topline is S$1,085.1m, down 2.3% YoY mostly due to the deconsolidation of Australand and lower revenues from domestic development projects. A dividend of 8.0 S-cents per share was proposed, versus 7.0 cents previously.

Unsold domestic residential exposure below 10% of assets

Over FY13, we saw 1,260 residential units sold in Singapore, up significantly versus the 681 units sold in FY12. Note that the group now has fairly limited exposure to the uncertain domestic residential space and its current 1.6k of unsold units forms <10% of total assets. With three relatively small sites in its landbank and, given management’s constructive view on the domestic residential space over the mid-long term, we expect them to continue replenishing their landbank this year. Management also updates that its Danga Bay project is likely to be launched for sales in FY14.

Chinese sales dip marginally but still healthy pace

In China, residential sales came in at 3,009 units – still a healthy pace – which is a mild 4.8% dip versus FY12, though sales value showed a sharper 21.5% dip to RMB 5.5b due to a change in mix to less high-end units. Chinese township project sales also increased 35.6%% to 4,679 units. Including township units and Raffles City strata apartments, the group is targeting a 30% increase in contracted sales for FY14. Management also reiterated their goal for a long term 8%-12% ROE target. Maintain BUY on CAPL; our fair value dips to S$3.50 (from S$3.77 previously) mostly due to lower valuations of listed holdings.

Source: OCBC Research - 20 Feb 2014