CapitaLand reported its 1Q19 results which missed ours and the street’s expectations. Revenue declined 23.8% YoY to S$1,048.3m due largely to lower contributions from its residential projects in Singapore and China, but partially offset by higher handover of residential units in Vietnam and contribution from acquisitions.

PATMI fell 7.4% to S$295.6m, but after adjusting for divestment gains/losses, revaluations and impairments, 1Q19 operating PATMI dipped 20.5% YoY to S$181.9m. This accounted for 18.6% and 16.5% of ours and Bloomberg consensus’ FY19 forecasts, respectively.

Looking ahead, ~RMB17.2b worth of Chinese residential units (~7.8k units) sold previously are expected to be handed over from 2Q19, with ~60% of this expected to be recognised from 2Q-4Q19. We believe CapitaLand will also continue its capital recycling drive to spur higher ROE for its shareholders. In 1Q19, S$485.6m of divestments were made, versus S$764.7m of investments.

We will provide more details after the analyst conference call. Maintain BUY with our fair value estimate of S$3.98 under review.

Source: OCBC Research - 2 May 2019