Capitaland clings to surging sales in China as Singapore impairment losses mount

It sustained $110m in impairment losses across residential projects.

Capitaland’s buoyant sales momentum in China served as a cushion to its mounting impairment losses and extension charges locally, as sales of new units in the red dragon grew by 17% yoy to 2,910 units for RMB3.8b.

According to UOB Kay Hian, Capitaland expects residential sales in China to remain steady in 2016, on back of favourable government policies.

“CapitaLand has over 7,300 launch-ready units (mainly La Botanica, The Metropolis, Summit Era and Century Park), and over 9,000 units expected to complete in 2016,” UOB Kay Hian said.

Meanwhile, this overshadowed the impairment losses of $110m across several Singapore residential projects based on an internal stress test exercise, according to UOB Kay Hian.

“Management estimates that extension charges from The Interlace, Urban Resort and D’Leedon should amount to about S50 psf or S$7m in 2016. Our worst-case estimate of S$147.8m assumes that no future sales is ostensibly significant, and represents a mere 0.6% of Capitaland’s book value,” UOB Kay Hian said.

Additionally, UOB Kay Hian said cooling measures will continue weighing down on Singapore’s residential market, which makes up 7% of Capitaland’s asset value.

“4Q15 saw 93 units moved at S$147m (+25.6% yoy). FY15 saw residential sales reach S$559m in Singapore, a slight dip of 0.3% yoy, with 244 units sold (-12.2% yoy),” the report said.