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CapitaLand Limited’s Latest Earnings: What’s Next After A Muted Quarter?

CapitaLand Limited (SGX: C31) released its second-quarter earnings yesterday.

As a quick background, CapitaLand is a real estate developer and investor. With a market capitalisation of over S$13 billion, CapitaLand is a large company in Singapore’s stock market and happens to be one of the thirty companies that make up the Straits Times Index (SGX: ^STI).

With that, let’s dig into its earnings to see how it performed.

Financial highlights

The following are some of CapitaLand’s latest financial numbers:

  • Revenue for the reporting quarter came in at S$1.13 billion, up 9.7% from a year ago.
  • But, the profit attributable to shareholders amounted to S$294 million, representing a 36.6% year-on-year decline. CapitaLand attributed the fall in profit to “lower fair value gains from revaluation of properties,” which more than offset an improved operating performance.
  • Earnings per share (EPS) followed suit, dropping 36.6% from 10.9 cents in the second-quarter of 2015 to 6.9 cents.
  • CapitaLand ended the reporting quarter with a book value per share of S$3.95, down by 2.2% from the S$4.04 seen a year ago.
  • Free cash flow for the reporting quarter was S$579.3 million (operating cash flow of S$600.9 million and capital expenditure of S$21.6 million). This was down from the prior year when free cash flow was S$751.8 million (operating cash flow of S$766.2 million and capital expenditure of S$14.4 million).
  • As of 30 June 2016, cash and equivalents stood at S$3.92 billion while total debt was S$15.5 billion, resulting in a net debt position of S$11.6 billion. This was an improvement from the second-quarter of 2015 when there was a net debt position of S$12.7 billion.
  • Sticking to the topic of debt, CapitaLand reported an interest coverage ratio of 5.7 in the second-quarter of 2016, down from the 6.7 seen in the second-quarter of 2015.

Business highlights

CapitaLand said that residential sales in Singapore, China, and Vietnam continued to perform well. In the first-half of the year, the company sold 304 homes in Singapore, which is nearly three times the 106 units sold in the first-half of 2015. CapitaLand also aid its “well-designed homes in good locations continued to attract homebuyers, with about 90% of launched units sold.”

Meanwhile, CapitaLand sold 6,273 homes in China during the first-half of 2016, some 50% higher compared to the same period last year. CapitaLand said that it “remains focused on the first- and second-tier cities in China, and on targeting first-time home buyers and upgraders.” The company added that it has over 3,000 launch-ready units in China for the second-half of the year.

Sticking with China, CapitaLand expects to recognise around RMB7.8 billion or more in value of sold homes in the second-half of 2016. This comes from the 9,000 or so sold-units – with a total value of around RMB13 billion – that will be handed over to buyers from the second-half of 2016 onward.

The road ahead

CapitaLand’s president and chief executive, Lim Ming Yan, had some words to share in the earnings release on his thoughts about the company’s future:

“CapitaLand’s operating performance has remained robust in an environment of slow economic growth and market uncertainties. Our recurring income provides stability and resilience.

We will maintain our focus on our core markets of Singapore and China and the growth markets of Vietnam and Indonesia, as well as our serviced residence global platform. In addition to capital recycling and portfolio optimisation, we will also leverage our fund management platform and management contracts to grow our assets under management.

With our strong balance sheet, we are well-positioned to seize attractive investment opportunities, to grow our recurring income and deliver sustainable returns in the future.”

CapitaLand’s shares closed last evening at S$3.18 each, representing a price to book value of 0.83.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Esjay does not own shares in any companies mentioned.