CapitaLand reported its FY19 results which exceeded our expectations. Revenue and EBIT rose 11.3% and 22.3% to S$6,234.8m and S$5,067.6m, respectively. This was driven largely by contribution from Ascendas-Singbridge (ASB) and higher rental income from Singapore, China, USA and Europe, but partially offset by weaker contributions from residential projects in Singapore and China.

PATMI jumped 21.2% to S$2,135.9m; while operating PATMI (stripping out revaluation gains/impairments and portfolio and realised fair value gains) also grew 21.2% to S$1,057.2m. This was 14.6% above our forecast.

For 4Q19, operating PATMI surged 95.7% YoY to S$418.3m. A first and final dividend of 12 S cents per share was declared, similar to FY18 despite the increase in the group’s operating PATMI.

CapitaLand highlighted that it prefers to adopt a prudent approach in light of the uncertainties caused by COVID-19. In FY19, CapitaLand delivered S$5.9b of gross divestments, which was 48% higher than FY18 and also above its annual divestment target of S$3b. As such, it was able to bring its net gearing ratio down to 0.63x, as at 31 Dec 2019, a year ahead of its original target of 0.64x by end-2020.

CapitaLand’s robust capital recycling activities also resulted in ROE of 10% for FY19 (FY18: 9.3%). More details will be provided after the analyst briefing. For now, we have a BUY rating and S$4.42 fair value on CapitaLand.

Source: OCBC Research - 26 Feb 2020