CapitaLand posts 28% rise in Q3 profit on fair value, portfolio gains

FAIR value and portfolio gains from its Singapore and China properties, together with a 60 per cent stake in CapitaLand Vietnam Commercial Fund I helped boost real estate giant CapitaLand's earnings for the third financial quarter by 28 per cent.

Net profit came in at S$316.95 million for the three months to Sept 30, 2017, from S$247.5 million a year ago.

The rise in net profit was mainly due to fair value gains arising from Golden Shoe Car Park, the serviced residence component of Funan integrated development in Singapore and Citadines Biyun Shanghai in China.

Portfolio gains arising from the divestments of both Wilkie Edge in Singapore and CapitaMall Anzhen in China, together with a 60 per cent stake in CapitaLand Vietnam Commercial Fund I also helped boost the bottom line.

Earnings per share was up to 7.5 Singapore cents, from 5.8 Singapore cents the year before.

The group's Q3 2017 operating profit after tax and minority interests, referring to profit from business operations, decreased by 18.8 per cent to S$204.5 million, due to lower handover of residential projects in China and the divestment of certain commercial assets in Singapore, the group said.

Revenue for Q3 2017 increased 9.7 per cent to S$1.51 billion on account of higher contribution from development projects in Singapore, higher rental revenue from newly acquired and opened shopping malls and serviced residences.

This quarter also marks the first time revenue from CapitaLand Mall Trust (CMT), CapitaLand Retail China Trust (CRCT) and RCS Trust (RCST) has been consolidated into the group's results, after the group assessed it had sufficient interest to control them.

"The group's equity stake in CMT and CRCT has progressively increased over the years arising from the issuance of units as consideration for management fees, acquisition and divestment fees as well as participation in distribution reinvestment plan. In Q3 2017, the group assessed that it now has sufficient interest to control CMT and CRCT having entered into arrangements to receive management fees and divestment fees in units," CapitaLand said.

"As the group owns equity stakes in RCST through both CapitaLand Commercial Trust, a consolidated entity of the group and CMT, with the consolidation of CMT, the group assessed that it has also control over RCST."

In a research note, OCBC Investment Research analyst Eli Lee said that this quarter's results were broadly within expectations.

The group announced residential sales remained stable in Singapore with 108 units sold in the third quarter, bringing the total number of residential units sold in the year to September to 293 with a sales value of S$1.15 billion. This includes units at Cairnhill Nine, which is fully sold as at July 2017, and Victoria Park Villas, which is 86 per cent sold as at Sept 30, 2017.

"Our active portfolio reconstitution has boosted our results as well as our AUM (assets under management) which stands at S$85 billion as at end of Q3 2017," said Lim Ming Yan, CapitaLand president and group CEO.

He added that the group will continue to maintain its presence in core markets of Singapore and China, while scaling up business in places like Vietnam through residential, serviced residence and commercial projects.

Looking ahead, the quarterly rise of 1.7 per cent in Grade A office rents supports the group's view that market rates have bottomed out. CapitaLand also expects improved sentiment to sustain the residential property market, underpinned by an increase in home prices and buying volume.

CapitaLand's shares were trading down S$0.03 or 0.8 per cent at S$3.69 as of 10.17am on Wednesday.