• We deem CapitaLand's 3Q/9M results broadly in line at 21%/59% of our FY18 forecast.
• We expect stronger 4Q on the back of high China residential handover.
• Maintain ADD. Our S$3.55 Target Price is based on a 35% discount to RNAV.

3Q18 Results Highlights

• CapitaLand reported PATMI of S$362.2m, +13.6% y-o-y, on a 17% decline in revenue to S$1.26bn. Stripping out divestment and fair value gains, core PATMI would have been S$233.7m, +13.3% y-o-y.
• The operating performance was largely lifted by contributions from newly acquired/opened properties in Singapore, China and Germany.
• 3Q/9M EPS made up 21%/59% of our FY18 forecast, which we deem broadly in line, in anticipation of stronger China residential earnings in 4Q.
• CapitaLand has achieved a 9M18 ROE of 6.9%, and looks well positioned to reach its annual target of 8%.

Expect Strong 4Q

• In China, CapitaLand handed over 1,279 units valued at Rmb2.1bn and sold an additional 826 units worth at Rmb2.6bn, mainly in Xian, Kunshan, Wuhan and Chengdu. It has locked in Rmb15.9bn pre-sales at end-3Q18. Of this, 40% is expected to be handed over in 4Q18, equivalent to its 9M achievement. CapitaLand plans to launch 3,472 units in 4Q.
• Recurrent rental income from its shopping mall portfolio continues to be supported by a 1.3% y-o-y improvement in tenant sales and 1.3% y-o-y rise in shopper traffic.

Replenished Singapore Inventory

• In Singapore, CapitaLand sold 14 residential units in 3Q valued at S$52m.
• CapitaLand has replenished its development pipeline with the purchase of the Pearl Bank Apartments enbloc site and a 50:50 JV for the Sengkang Central mixed use parcel. The former is expected to be launched in 2Q19.
• In Vietnam, CapitaLand has locked in S$712m pre-sales of which 10% is expected to be recognised in 4Q18.

Strong Capital Re-deployment

Maintain ADD

Source: CGS-CIMB Research - 14 Nov 2018