• 3Q14 within expectations
• SG and CN resi sales still muted
• Divestment of Westgate Tower in 4Q14

3Q14 PATMI holding steady

3Q14 PATMI of S$130.0m is mostly flat YoY (+1.3%). Profit contributions from SG residential and Ascott dipped over the quarter, offset by higher earnings from Chinese residential and CapitaMalls Asia. This set of results is in line with our expectations and 9M14 PATMI now constitutes 85.4% of our FY14 forecast. 3Q14 topline decreased 4.3% YoY to S$918.9m as revenues from Chinese development projects held by subsidiaries fell, partially mitigated from increased revenues from SG residential and rental income from the group’s retail malls and serviced residences.

Continued headwinds for SG residential sales

SG residential sales further slowed to 42 units in 3Q14, which is very soft both on QoQ terms (161 units sold in 2Q14) and YoY terms (468 units in 3Q13). Year to date, the group has sold 237 units in Singapore worth S$444m, again down significantly versus the 1,151 units worth S$2.2b sold over 9M13. That said, we note that the group’s major projects are substantially sold as at end Sep-14 (i.e., The Interlace 83% sold, d’Leedon 85%, Sky Habitat 68% and Sky Vue 73%) as the group led the market in implementing price incentives over the latest down-cycle. In China, the trend of slowing YoY sales also continued with 1,057 units sold in 3Q14 versus 1,646 in 3Q13, though management indicates that 81% of the launched units have been sold to date with fairly decent responses at recent launches at Vista Garden (Guangzhou), New Horizon and Lotus Mansion (Shanghai).

Divestment of Westgate Tower ahead

9M14 same-mall NPI for CapitaMalls Asia increased 3.8% and 20.5% in Singapore and China, respectively, with Chinese shopper traffic also growing 5.5% over the period. Singapore, however, saw shopper traffic dip marginally by 2.4%. We also note that Westgate Tower obtained TOP status in Oct-14, and the divestment of the asset at S$579.4m is expected to be completed in 4Q14. Maintain BUY with an unchanged FV estimate of S$3.79.

Source: OCBC Research - 10 Nov 2014