• CapitaLand’s 2Q18 and 1H18 results were slightly below our expectations.
• Higher handover of China residential units in 2Q; it will time the pace of its new launches to market conditions.
• Purchase of Pearl Bank Apartment enbloc site boosts Singapore residential inventory.
• Adopting a 50/50 emerging/developed market capital allocation.
• Maintain ADD and S$3.55 Target Price.

2Q18 Results Summary

CapitaLand reported 2Q18 PATMI of $605.5m, up 4.4% y-o-y, on a 35% y-o-y jump in revenue to S$1.34bn. Stripping out fair value and divestment gain, operating PATMI would have been 5.6% lower at S$196m.

CapitaLand’s 2Q/1H results were slightly below our expectations, at 18%/38% of our full-year forecasts. The underperformance came largely from higher-than-expected effective tax rate due to a higher proportion of China profits and provision of S$6.9m taxes for prior years.

Source: CGS-CIMB Research - 08 Aug 2018