CapitaLand expects materially adverse impact for FY2020 financial performance

CAPITALAND expects financial performance for FY2020 to be materially adversely impacted, despite seeing "encouraging signs of recovery" in operating metrics for Q3, the group said on Tuesday evening.

In its business update for the third quarter ended Sept 30, the property giant said: "Following significantly reduced profitability in H1 2020 and arising from a subdued operating environment, lower expected capital recycling, year-end revaluation that will be applied to the group's investment property portfolio, as well as impairment assessment for equity investments, CapitaLand's financial performance for FY2020 will be materially adversely impacted."

CapitaLand said it still expects to deliver positive cash profits for FY2020 from its diversified operating income streams, adding that its financial position "remains resilient". It previously reported an 89 per cent year-on-year drop in net profit to S$96.6 million for the fiscal first-half ended June 2020.

The group said that there were encouraging signs of recovery in Q3 as operating metrics across its portfolio improved quarter on quarter, especially in the residential, retail and lodging segments, as the Covid-19 situation improved globally.

These segments were hardest hit by Covid-19 mitigation measures earlier this year, when residential sales offices were forced to close, non-essential retail trades were unable to operate, and occupancy of lodging assets were reduced due to travel restrictions.

In terms of residential segment performance, CapitaLand said unit handovers were back on track in China and Vietnam. The group sold over 1,900 units in China during the third quarter, 40 per cent higher than the previous quarter. Unit handovers in China for the nine months ended September 2020 exceeded the prior year period in total value, while its Vietnam business saw a year-on-year tripling in both units and handover value.

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For the Singapore residential market, CapitaLand sold three times the number of units during Q3 as compared to the total sold in the first half of 2020. It sold 131 units worth S$201 million for the first nine months of 2020. The group said it has launched new units at One Pearl Bank and Sengkang Grand Residences to meet increased demand.

The retail segment saw shopper traffic and tenant sales narrow the gap to pre-Covid levels for the nine months. CapitaLand said the committed occupancy rate remained largely stable and almost all tenants have resumed operations.

Tenant retention rate also remained high for its Singapore portfolio, at more than 80 per cent. The group has disbursed over S$320 million in rental rebates to tenants for the nine months.

For the lodging segment, CapitaLand said there was optimism on recovery with increasing resumption of domestic travel. It said that its asset light operating platform maintained positive cash flow for the nine months.

Around 96 per cent of its lodging properties were operational as at quarter-end, with occupancy rising to around 50 per cent during the quarter, up from about 40 per cent in the prior period. Revenue per available unit (RevPAU) rose 22 per cent quarter on quarter. However, RevPAU for Q3 2020 was still 52 per cent lower than the prior year period from the impact of Covid-19.

While there has been progress in Q3, CapitaLand said overall business and consumer sentiment remains cautious, underpinned by the uneven pace of recovery, and concerns over a resurgence in the pandemic.

CapitaLand said it will continue to look for attractive investment opportunities to reposition the group for growth across its three strategic pillars of development, lodging and fund management. The group said it is confident that it has the resilience and agility to successfully navigate through the pandemic.

For FY2021, CapitaLand expects the pace of the global economic recovery to remain highly dependent on multiple factors, such as a reliable Covid-19 vaccine, the resumption of normal international travel, and the easing of geopolitical tensions.

"Until then, financial returns expectations based on pre-Covid assumptions may also have to be moderated," CapitaLand said.

CapitaLand shares rose 2.39 per cent, or S$0.06 per share, on Tuesday to close at S$2.57, before the business update was released. The counter hit an eight-year low on Monday, when it closed at S$2.51.