Chinese business to extend CapitaLand's winning streak in Q4

It expects to recognise around $1.27b of revenue from China by Q4.

CapitaLand is expected to end the year with a bang as strong residential business from China is expected to haul in $1.27b (RMB6.4b) in revenue by Q4, according to analysts. 

Close to 3,500 units will be released by CapitaLand in China by Q4. 

The latest revenue boost from China adds to the $1.23b (RMB6.2b) in value that was already recognised in the first nine months of of 2018. 

CapitaLand launched four residential projects in Chengdu, Wuhan, XI’an and Kunshan which sold over 90% of units across all projects in October.  “It sold 1,506 units with a total value of $397m (RMB2b), marking its best monthly sales,” RHB Research analyst Vijay Natarajan said. “This indicates healthy demand despite the cooling measures on the sector in China.”

Also read: CapitaLand Q3 profits jumped 13.6% to $362.22m

The firm’s pipeline of over 39,400 units under development is expected to more than double its recurring management fees from $80m when completed, DBS analysts added. 

CapitaLand’s Q3 profits rose 13.6% to $362.22m from $318.8m in 2017 on the back of higher operating income and gains from asset recycling.

“CapitaLand has been active on reconstituting its portfolio, making total investments of $6.1b YTD,” OCBC Investment Research (OIR) analyst Andy Wong Teck Ching said. “This has partially been balanced by divestments amounting to $4b which generated gains of $288.7m.”

Some of CapitaLand’s investments included a 16 freehold multifamily properties in the US for $1.14b, a joint acquisition of a Raffles City integrated development in Shanghai with GIC and two prime residential sites in Guangzhou, OIR highlighted.

In terms of its retail business, CapitaLand continued to report healthy metrics with a 2.2% and 20.9% sales growth in Singapore and China respectively, according to analysts. Its malls in Malaysia and Japan on the other hand remained weak at -6.4% and -4.9%, respectively. 

“The group reported steady same-mall net profit income (NPI) growth of 2.1% to 7.7% in Singapore and China respectively, which is an improvement QoQ,” DBS analysts said. “We also note that tenant sales per sqf are growing steadily at 1.2% and 4.5% for its Singapore and China malls, whilst Malaysia and Japan recorded 6.7% and -2.5%, respectively.”

Given CapitaLand’s active capital recycling strategy and continued efforts to boost the value of its properties, the firm generated a return on equity (ROE) of 6.9% YTD, Wong said. 

“This puts it well on track to deliver its annual ROE target of at least 8%,” he noted.

CapitaLand is set to open two new malls in 2019, Jewel Changi Airport in April and Funan in Q2, whilst its Pearl Bank site and Sengkang mixed-use project are also slated to launch in the same year.