Capitaland - China residential slows..

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Capitaland - China residential slows..

StockFanatic

Publish date: Thu, 31 Oct 2013, 12:49 PM

■ CAPL - China resi sales slows; stock could trade sideways

■ Measures might not cool Malaysia home prices

■ Singapore firms unveil overseas investments

CAPL - China resi sales slows; stock could trade sideways

■ 9M13 results below due to delayed recognition (more in 4Q): 9M13 Core PATMI at S$343m (+33% YoY) was 48% of our estimates and 50% of consensus due to back-ended China residential recognition (1,800 units in 4Q). 9M13 revenue was up 32% to S$2,892m, while reported PATMI was up 6% to S$707m. 3Q13 revenue rose 53% to S$1,047.8m, while Core PATMI was up 13% to S$102m. Gearing was stable at 44% with cash of S$5.6bn.

■ China volumes flattish QoQ, SG volumes rebound on discount: China home sales remain robust with 2,398 units sold in 9M13 vs 1,978 in 9M12 (up 21% YoY). However, in 3Q13 CAPL sold only 707 units (-22%YoY and -4%QoQ) due to lack of launches. CAPL has another 650 launch ready units in China for 4Q but last year's 4Q number is hard to beat (1,183 units).

Singapore sales were up 2.4x QoQ and 5.7x YoY at 468 units sold (vs 139 in 2Q and 544 in 1Q) on the back of launch of Sky Vue (86% sold of 505 units launched), which was launched at a discount to the neighboring CAPL project SKY Habitat, thus, leading to robust interest amongst buyers. Interlace received early TOP on 21 Sep 2013. CAPL still has 1,115 unsold units (slow moving) in Singapore, with a pipeline of site at Marine Parade Road, which is yet to be launched.

■ Strategy remains the same:

We have been highlighted that even under the new CEO the group's strategy seems to be largely unchanged (Australand unsold, Vietnam a "long term" investment, and insignificant Storhub investment), while reinvestment cycle remains slow. While measures such as cutting prices in Singapore to get sales moving are positive, however, sales continue to remain slow moving and CAPL could have to take more price cuts.

Technical Analysis

Daily Chart

■ BUY on valuations but stock could trade sideways:

While valuation is undemanding (0.87x P/B), new management has not delivered significant investments/divestments that could prove impactful to the direction of company. Moreover, China residential sales execution is surprisingly slower than we thought and 4Q could see a declining YoY sales number due to high base.

We are reviewing our numbers; we currently have a BUY on valuation with a TP of S$3.71/share set at a 15% discount to our RNAV of S$4.37/share but stock needs much more catalysts to outperform from here. (Read Report)

Read Related Reports

CapitaLand - More residential sales activity
Thursday, 31 October 2013

- DBS Group Research

CapitaLand - More deliveries in 4Q13
Thursday, 31 October 2013

- CIMB Research

Source : Religare Institutional Research

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