CapitaLand announced its 2Q18 results this morning which were in-line with our expectations. Revenue and gross profit jumped 35.3% and 50.5% YoY to S$1,342.4m and S$571.5m, respectively. This was driven largely by the higher turnover of residential units in China and the consolidation of CMT, CRCT and RCS Trust from 3Q17.

Singapore and China contributed a combined 74.8% of CapitaLand’s revenue. PATMI rose 4.4% YoY due to higher revaluation gains, but operating PATMI fell 5.6% to S$196.0m.

For 1H18, CapitaLand’s revenue accelerated 43.8% YoY to S$2,718m, but PATMI and operating PATMI declined 5.0% and 23.0% to S$924.6m and S$424.7m, respectively. The latter formed 46.0% of our FY18 forecast.

If we exclude the gain of S$160.9m from the sale of 45 units of the Nassim in 1H17, CapitaLand’s adjusted operating PATMI would have grown 9%.

During 1H18, the Group sold 77 units in Singapore for a total sales value of S$286m, versus 187 units sold for S$793m in 1H17. This was due to its low inventory level of launched projects, which we believe would work in CapitaLand’s favour given the property cooling measures which came into effect on 6 Jul.

In China, CapitaLand sold 1,744 units for RMB4,907m, a decline of 67% and 43% YoY. This was largely attributed to launches being deferred as a result of tighter government measures.

We will provide more updates after the analyst briefing. We maintain our BUY rating, but our S$4.26 fair value is under review.

Source: OCBC Research - 8 Aug 2018