10 Things To Know About CapitaLand Limited’s 2018 Second-Quarter Earnings

CapitaLand Limited (SGX:C31), one of the three property stocks in Singapore’s Straits Times Index (SGX: ^STI), released its earnings update for the second quarter of 2018. Here’s a quick summary of its business dealings for the quarter:

1. Revenue increased 35.3% year-on-year to S$1,342.4 million, mostly due to accounting changes as the group consolidated CapitaLand Mall Trust (SGX: C38U), CapitaLand Retail China Trust (SGX: AU8U) and RCS Trust (special purpose trust that holds Raffles City Singapore) into its results.

2. More importantly, profit after tax and minority interest (PATMI) increased 4.4% to S$605.5 million. Operating PATMI, which excludes gains or losses from divestments, revaluations and impairments, decreased 5.6% to S$424.7 million due to lower fair value gains.

3. The higher PATMI was largely due to contribution from newly acquired or opened investment properties and higher fair value gains for properties in Singapore. But this was partly offset by lower contributions from residential projects in Singapore and China.

4. The group reported a S$417.6 million revaluation gain in the first half of 2018, up 36% from 2017. Cash PATMI, which excludes unrealised revaluation gains, made up 61% of total PATMI for the first half of 2018.

5. As of 31 June 2018, CapitaLand had S$21.9 billion in borrowings and S$5.3 billion in cash and equivalents, giving it a net debt position of S$16.6 billion. It had a net debt to asset ratio of 29% and net debt to equity ratio of 50%, which is reasonable for a property developing company.

6. Interest cover was a healthy 7.8 times and around 73% of CapitaLand’s debt was on fixed rate. Net tangible asset per share stood at S$4.39, up from S$4.20 recorded in December 2018.

7. Below is a breakdown of the group’s assets by geography and asset class:

Source: CapitaLand Limited 2018 Q2 Earnings Presentation

8. During the first half of 2018, CapitaLand divested S$3.1 billion of assets for gains of S$140.4 million and made S$1.79 billion worth of new purchases.

9. The group is also looking to expand its assets under management (AUM) for its property management business. It now has AUM of SS$93.1 billion and is on track to add another S$10 billion by 2020. It received S$112.7 million in REIT and fund management fees in the first half of 2018, through five REITs and 16 private equity funds.

10. On the group’s prospects, management said that due to the additional stamp duty and tightened loan-to-value limits, it expects residential sales to moderate in Singapore. In China, escalating trade conflict has sent “jitters across the global economy”. But the government has begun to adjust domestic policies such as injecting funds and relaxing loan conditions to support businesses, and hence domestic consumption and growth in the non-manufacturing sector will “likely stay robust”.

Capitaland Limited expects to have 4,000 launch-ready units in China by the end of 2018. As of 30 June 2018, the group had around 8,000 units valued at RMB 16.2 billion that have been sold but not yet handed over. It also invested in a 32-hectare mixed used site in Chongqing in June 2018, which will yield another 2,100 units when completed, building up the residential pipeline in China.

Shares in CapitaLand closed on Friday at S$3.31 per piece, giving a price-to-earnings ratio of 10.2 and a 25% discount to the net tangible asset value per share.

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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 writer Jeremy Chia doesn’t own shares in any companies mentioned. The Motley Fool Singapore has a recommendation on CapitaRetail China Trust and CapitaLand Mall Trust.