Finally, CapitaLand sees silver lining in China property market

Sales ballooned 329% in 2Q12.

According to OCBC, as at end-3Q12, an estimated 38% of CapitaLand’s (CAPL) total assets were exposed to China and we believe that the significant slowdown in the Chinese residential sector, in terms of price appreciation and volume, constituted considerable headwinds on the share price over 2010-2012.

Here's more from OCBC:

However, we are beginning to see signs of life in the Chinese residential space as CAPL showed a sustained uptick in the pace of sales in 2Q12 (812 units, up 329% QoQ) and 3Q12 (911 units).

Over 3Q12, CAPL reported sturdy demand from first-time home buyers and upgraders, and 257 units and 120 units were launched at CAPL’s projects, The Loft, Chengdu, and The Pinnacle, Shanghai with healthy take-up rates of 81.3% and 67.5%, respectively.

Also, Chinese new home prices rose by the most in four months in Nov, increasing 0.26% to CNY 8,791 psm, data from SouFun showed.

For CAPL’s Chinese retail mall exposure, we see mall subsidiary CMA reporting 3Q12 PATMI of S$62.4m, up 71% YoY, mostly due to Minhang and Hongkou contributions and higher management fees.

Retail conditions in the key Chinese market appear healthy: 9M12 shopper traffic, tenant sales and same-mall NPI in China rose YoY by 8.4%, 10.7% and 18.4%, respectively.

With the Chinese property market showing firm fundamentals, we believe that CAPL’s long-term Chinese strategy would likely provide tailwinds for the counter in 2013.

Moreover, we note that its balance sheet remains sturdy with S$5.4b cash and 46% net gearing.