• No surprises in 1Q16 results
• 3.4k CN homes sold in 1Q16
• Unchanged FV estimate of S$3.68

1Q16 results within expectations

CAPL reported that its 1Q16 PATMI increased 35.4% YoY to S$218.3m. Excluding gains from the change in use of properties, operating PATMI grew 10.6% YoY mainly due to higher contributions from China development projects, new contributions from CapitaGreen, and improved operating performance from the group’s retail and serviced residences businesses.

In terms of the topline, 1Q16 revenues dipped 2.3% YoY to S$894.2m largely due to the absence of a S$59.6m fair value gain from the change of use in Ascott Heng Shan Shanghai in 1Q15, reduced contributions from development projects in Singapore and Vietnam, partially offset by stronger residential sales in China and higher rental income from CapitaGreen and the serviced residences business.

Overall, we judge this quarter’s numbers to be in line with expectations and 1Q16 PATMI and revenues constitute 24.5% and 21.6% of our full year forecasts, respectively.

Firm rate of home sales in China holding up

The group’s Chinese home sales continued at a healthy clip with 3,377 units sold in 1Q16, up a whopping 3x versus 1,306 units in 1Q15, while operating performances at its Chinese mall portfolio remained steady as 1Q16 tenant sales and shopper traffic grew 1.0% and 0.9% YoY, respectively.

We understand that the slowing growth is attributed to maturation of new malls and a change of retail mix, and we continue to see healthy rental reversions with 7.0% samemall NPI growth. In Singapore, CAPL sold 222 units in 1Q16, up significantly from 69 units in 1Q15, mainly due to a well-received launch at Cairnhill Nine. The group’s serviced residences units, Ascotts, saw overall 1Q16 RevPAU increase 2% YoY to S$114 and expects about 4.9k pipeline units to be opened in FY16.

Maintain BUY with S$3.68 fair value estimate

The group’s balance sheet remains healthy; net gearing dipped marginally to 47% (from 48% as at end 4Q15) with a cash balance of S$3.9b. Maintain BUY with an unchanged fair value estimate of S$3.68.

Source: OCBC Research - 21 Apr 2016