This week is set to be another busy week of corporate earnings updates. Two companies I will be watching are CapitaLand Limited (SGX: C31) and United Overseas Bank Ltd (SG: U11). Growing through acquisitions CapitaLand Limited is one of Asia’s largest real estate companies with a presence in over 30 countries. The property company owns, develops and manages real estate assets. CapitaLand was in the spotlight earlier this year when it announced the proposed acquisition of Ascendas-Singbridge Pte Ltd from Temasek for S$10.9 billion. The acquisition will bring the group’s combined assets under management (AUM) to S$116 billion,…
Growing through acquisitions
CapitaLand Limited is one of Asia’s largest real estate companies with a presence in over 30 countries. The property company owns, develops and manages real estate assets. CapitaLand was in the spotlight earlier this year when it announced the proposed acquisition of Ascendas-Singbridge Pte Ltd from Temasek for S$10.9 billion. The acquisition will bring the group’s combined assets under management (AUM) to S$116 billion, well above its 2020 target of S$100 billion.
The acquisition will also mean that CapitaLand will become the manager of Ascendas Real Estate Investment Trust (SGX: A17U), one of the largest REITs in Singapore. CapitaLand has said that the acquisition will have a positive impact on earnings per share and return on equity, but will be dilutive to net asset value and will have a short-term impact on gearing. The acquisition will be funded by a 50:50 mix of cash and new shares.
In 2018, CapitaLand reported a 21% increase in revenue and a 12% growth in net profit to shareholders. The real estate giant will release its first-quarter earnings on Tuesday 30 April.
Can this bank follow up on its impressive 2018?
United Overseas Bank will be the second major bank in Singapore to release results this week. DBS Group Holdings Ltd (SGX: D05) led the way yesterday, announcing another record quarterly results as strong net interest income offset weakness in wealth management, brokerage, and investment banking fees. DBS reported a five percentage points rise in net interest margin and analysts are expecting similar trends for its peers.
UOB, like the other two banks, had a stellar year in 2018, reporting an 18% spike in earnings, whilst maintaining healthy balance sheet metrics; the loan-to-deposit ratio was 88.2%, and its Common Equity Tier 1 capital adequacy ratio was 13.9%, well above the Monetary Authority of Singapore’s 6.5% requirement.
In 2018, the bank’s net interest income increased by 9.7%, driven by 11% loan volume growth and an average of five percentage points increase in net interest margin.
The net interest margin is the difference between the bank’s cost of funding and loan interest earned. However, the Fed’s recent dovish stance on interest rates could mean that net interest margin expansion could slow down towards the second half of 2019.
UOB will release its results on Friday, 3 May. Investors should keep an eye on the loan book and net interest margins, as well as the bank’s fee income.
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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 recommends DBS Group Holdings Ltd, United Overseas Bank Ltd, CapitaLand Limited and Ascendas Real Estate Investment Trust. Motley Fool Singapore contributor Jeremy Chia owns shares of DBS Group Holdings Ltd.