CapitaLand set for a robust growth despite headwinds

Thanks to strong performance from retail malls and commercial properties.

CapitaLand (CAPL)’s strategy to focus on growing its commercial portfolio is bearing fruit, offering better earnings visibility, said DBS Vickers Securities.

CAPL reported a robust 28.4% growth in net profit to S$247.5m, on the back of stronger revenues which was up 27.7% to S$1,373m. Core net profit was up 55% to S$251.8m.

The better performance was seen across its portfolio, driven by higher development projects in Singapore and China and better performance from its Singapore commercial portfolio.

Moving forward, OCBC Investment Research believes earnings drivers will come from Growing recurring revenues from retail mall portfolio and Ascott.

Here's more from OCBC Investment Research:

While trading properties (residential development and strata offices) account for 24% of assets, we see continued strength from CAPL’s retail mall division (CapitaMalls Asia) and commercial integrated developments, including Ascott Group, its successful serviced residence brand, which form a significant 76% of total assets and is expected to contribute to growing recurring income for the group.

CapitaMalls Asia continues to perform steadily despite ongoing operational headwinds. There are 87 operating properties across Asia (56 of it in China).

As at Sep-16, the group’s shopping malls continue to record steady sales and occupancy rates. Portfolio tenant sales remained healthy at 2.5% for Singapore and 5.2% in While trading properties (residential development and strata offices) account for 24% of assets, we see continued strength from CAPL’s retail mall division (CapitaMalls Asia) and
commercial integrated developments, including Ascott Group, its successful serviced residence brand, which form a significant 76% of total assets and is expected to contribute to growing recurring income for the group.

CapitaMalls Asia continues to perform steadily despite ongoing operational headwinds. There are 87 operating properties across Asia (56 of it in China). As at Sep-16, the group’s
shopping malls continue to record steady sales and occupancy rates. Portfolio tenant sales remained healthy at 2.5% for Singapore and 5.2% in While trading properties (residential development and strata offices) account for 24% of assets, we see continued strength from CAPL’s retail mall division (CapitaMalls Asia) and commercial integrated developments, including Ascott Group, its successful serviced residence brand, which form a significant 76% of total assets and is expected to contribute to growing recurring income for the group.

In addition, Raffles City integrated developments in China will continue to offer stable returns (7(7-8% for stabilised properties in Shanghai and Beijing, c.3% for stabilising properties in Chengdu and Ningbo). Looking ahead, the group will be opening four more Raffles City developments in 2016-2018, which will boost the group’s returns and profitability when completed.

The Ascott Limited remains on the fast track to achieve its 80,000-unit target by year 2020 and will add another 770 units by 4Q16. Ascott’s investment in China’s largest and fastest growing online apartment sharing platform, Tujia has yet to bear fruit meaningfully but we continue to believe in its longer term synergies and ability to leverage on Tujia’s platform to reach out to a wider addressable market in the medium term.