With a market capitalisation of S$15.8 billion, CapitaLand Limited (SGX:C31) is one of Asia’s largest real estate companies. Its businesses include managing and investing in properties around the world and development of residential and commercial properties to sell. The group also owns and manages a few REITs listed in Singapore.
At the end of April this year, CapitaLand Limited released its results for the first quarter of 2018. Here are some highlights from its earnings update.
Revenue up but profit down
Revenue over the reporting quarter increased 53.3% to S$1.38 billion from S$898 million over the same period last year. This was mainly attributed to accounting consolidation of revenue from CapitaLand Mall Trust (SGX: C38U), CapitaLand Retail China Trust (SGX: AU8U) and RCS Trust, and revenue earned from the development projects of Victoria Park Villas in Singapore and The Metropolis in China.
Despite the increase in revenue, profit after tax and minority interest (PATMI) dropped 18.8% to S$319.1 million from S$392.8 million. This was largely because the first quarter of 2017 included a gain of S$160.9 million from the sale of its development project – The Nassim.
Consequently, earnings per share fell 20.9% to 6.8 Singapore cents from 8.6 Singapore cents a year ago.
Financial position looks stable
As of 31 March 2018, the group had total assets valued at S$62 billion and borrowings of S$21.7 billion. This puts its leverage ratio at a safe 35%.
The interest cover ratio, a measure of a company’s ability to pay off its financing expenses through its earnings, stood at a comfortable 7.7 times. The group also has managed to secure 73% of its borrowings on fixed rates, meaning it is less susceptible to interest rate fluctuations.
Net asset value per share rose 3.4% to S$4.51 from S$4.34 in December while net tangible assets rose 4% to S$4.38 from S$4.20.
During the quarter, CapitaLand won the bid for Pearl Bank Apartments at a land price of S$929.4 million (S$1,515 per square foot). The land is strategically located near Outram MRT and will add to its pipeline of residential projects in Singapore.
CapitaLand Limited handed over 1,328 units to home buyers in China over the quarter. There is an additional 8,000 units valued at RMB 15.1 billion (S$3.17 billion) that have also been sold but not yet handed over. The group expects this value to be recognized over the next nine months.
In Vietnam, 2,600 units that are going to be completed have already been sold at S$686 million. About 50% of this value will be handed over and recognized over the remaining course of the year. The group has also set up a second commercial fund in Vietnam to increase its recurring fee-based income.
President and Group CEO, Lim Ming Yan, said:
“CapitaLand is on track to achieve our annual S$3 billion capital recycling target while we explore investment opportunities across asset classes.”
The management team also highlighted that it plans to grow operating networks through third-party management contracts in existing and new geographies, which will add to its fee-based income and provide stability to its revenue and profit stream.
Share price and valuations
At the time of writing, shares of CapitaLand Limited were trading at S$3.78. This translates to a price-to-earnings ratio of 11.0, a price-to-book ratio of 0.9 and a dividend yield of 3.2%.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended units of CapitaLand Mall Trust and CapitaLand Retail China Trust. Motley Fool Singapore contributor Jeremy Chia doesn’t own shares in any companies mentioned.