Brokers' take: Analysts maintain 'buy' on CapitaLand

BROKERS seem to agree that CapitaLand's first-quarter earnings were in line with their estimates, and that the real estate company is poised for growth.

DBS Group Research has issued a "buy" call on the stock with a target price of S$4.35, representing a 16 per cent upside from the counter's trading price of S$3.76 apiece on April 30.

Similarly, RHB and UOB Kay Hian are maintaining "buy" ratings on CapitaLand, with a target price of S$4.20 and S$4.30 respectively. RHB added that its target price of S$4.20 is pegged at a 15 per cent discount to its revalued net asset value (RNAV) estimate of S$4.94 per share.

OCBC Investment Research has also kept its forecasts, with a RNAV fair value estimate of S$4.26 on the stock.

As at 11am on Wednesday, shares in CapitaLand were trading up 0.3 per cent, or one Singapore cent, to S$3.77 apiece.

For the three months ended March 31, CapitaLand's net profit fell 18.8 per cent to S$319.1 million. However, excluding a S$160.9 million net gain from the en bloc sale of 45 units of The Nassim recorded a year ago and one-off items, operating net profit would have increased by 25 per cent to S$228.7 million. This came on the back of higher development profits in Singapore, and higher rental income from malls and offices in China, Japan and Germany.

Brokers UOB Kay Hian and RHB noted that the company's management is expecting strong recovery in the Singapore residential property market.

In February this year, CapitaLand announced the acquisition of the Pearl Bank Aparments via a collective sale for S$929.4 million including a lease top-up premium.

Within the Singapore market, the group also sold 40 units worth S$150 million, mainly from high-value Victoria Park Villas. Most of the units in Singapore across seven developments are now substantially sold at more than 96 per cent, with the exception of Marine Blue which sold 84 per cent of 124 units, DBS said.

RHB added that it expects the company to selectively acquire a few more residential sites in Singapore this year to replenish its residential land bank.

Separately, UOB Kay Hian noted that CapitaLand's management has guided a positive outlook for the Singapore office market on improved occupancies and rent pick-up, but noted that the retail segment continues to be challenged. It added that the company will deepen its footprint in the core markets of Singapore and China, but will look to expand further in Vietnam and Indonesia.

"Looking ahead, we expect expect sales momentum in China to pick up as CapitaLand has 5,725 launch-ready units over Q2 to Q4 2018," OCBC said.