CapitaLand Q4 profit almost doubles to S$926.6m

Singapore

CAPITALAND posted sparkling fourth-quarter results on Wednesday, with net profit almost doubling to S$926.6 million for the three months ended Dec 31 from S$475.7 million previously.

But Asia's largest diversified real estate group disappointed shareholders with an unchanged dividend of 12 cents per share which it said is a prudent measure to enable the group to remain resilient during this period of uncertainty brought on by the Covid-19 outbreak.

The stock closed five cents, or 1.34 per cent, lower at S$3.67.

The group remains focused on growth and more acquisitions can be expected, said Lee Chee Koon, CapitaLand group chief executive.

Its strong balance sheet and disciplined approach will enable it to seek counter-cyclical opportunities over the next few months, Mr Lee said at the group's briefing.

The company also announced on Wednesday it had acquired a prime freehold business park in the UK for £126.7 million (S$222.4 million). Arlington Business Park is located in Theale, Reading and comprises 11 Grade A office buildings totalling about 367,000 square feet of net lettable area.

On a positive note, there is some evidence that life is returning to normal both in Singapore and China - its two core markets which accounted for 81 per cent of group revenue.

For instance, massive traffic jams were seen in Shanghai and Guangzhou on Wednesday morning, said Mr Lee.

In terms of impact on this year's earnings from Covid-19, it is too early to say as the situation is still evolving, he said.

CapitaLand said the 94.8 per cent rise in net profit for Q4 was mainly due to better operating performance, higher gains from asset recycling and revaluation of investment properties.

Earnings per share stood at 18.4 Singapore cents for the quarter, up from 11.4 cents a year earlier.

Revenue rose 46.3 per cent to S$2.38 billion, mainly due to the consolidation of Ascendas-Singbridge and Raffles City Chongqing, as well as higher contributions from Singapore and China malls and lodging properties in the US.

This was partially offset by lower contributions from the residential properties in Singapore and Vietnam. The residential developments contributing to revenue in the quarter were Raffles City Residences in Chongqing, Vermont Hills in Beijing and Parc Botanica in Chengdu, China; as well as Marine Blue in Singapore.

For the full year, net profit rose 21.2 per cent to S$2.14 billion.

Return on equity (ROE) hit 10 per cent, delivering a return exceeding its cost of of equity for the third year running. ROE was 9.3 per cent in 2018.

In 2019, it divested assets worth S$5.9 billion in gross value, almost double its annual target of S$3 billion.

The group brought down its net debt-to-equity ratio to 0.63 time as at end-2019, from 0.73 time following the combination of Ascendas-Singbridge, a year ahead of target.

Capital recycling in 2019 resulted in a net release of S$2.8 billion back to the group, positioning it to further support operations should the impact from Covid-19 be prolonged.

"Importantly, we are also in a good position to selectively pursue good opportunities that may arise to further strategically grow our business," it said.

The group has S$13.1 billion in cash and available undrawn facilities.

In November 2019, it announced the joint-development of the Liang Court site into an integrated development.

Last month, it won the tender for the integrated management of Bugis Village and Bugis Street.

The group also said it remains focused in expanding its real estate fund management business. Total assets under management (AUM) increased by 36 per cent to S$73.7 billion for 2019. Total AUM is through seven real estate investment trusts and business trusts as well as 25 private equity funds.

It will continue to grow its fund management platform by strengthening the listed trusts' focus and broadening private funds' coverage.

On its lodgings business, last year, through wholly owned unit The Ascott, it opened about 7,500 units in over 40 properties across 30 cities and 13 countries. The company remains on track to achieve its global target of 160,000 units by 2023.

Commenting on the results, Citi analyst Brandon Lee said: "CapitaLand's FY2019 ROE of 10 per cent exceeded our expectations, but the flat DPU (dividend per unit) is a slight disappointment."

"New targets for AUM/lodging business point to its focus going forward, while net gearing of 0.63 time suggests acquisitions are in the offing," he said.