CapitaLand starts to reap fruits of ASB buy

Singapore

CAPITALAND has started to reap the initial fruits of its acquisition of Ascendas-Singbridge (ASB). The group posted a 34.6 per cent year-on-year increase in fee income from managing its real estate investment trusts (Reits), and private equity funds to S$86.8 million in the third quarter ended Sept 30.

The figure for Q3 FY2018 was S$64.5 million.

For the first nine months of this year, fee income from managing Reits and private equity funds increased 12.3 per cent to S$188.5 million, from S$167.9 million in the year-ago period.

The higher income is in line with the increase in Reit and fund assets under management from S$54.2 billion at end-2018 to S$71.7 billion at end-September 2019. The main reason for the increase is the acquisition of ASB, which was completed on June 28.

"The strengthened recurring income will provide us with greater stability as we continue to drive growth for the group," said CapitaLand Group group chief executive officer Lee Chee Koon.

The ASB acquisition also helped to boost total fee income (which also includes property management, serviced residence management, project management and other sources) to S$448 million for the first nine months of 2019 from S$272.4 million in the first six months of the year.

The group posted a 7.8 per cent y-o-y drop in net earnings to S$333.93 million for Q3 FY2019. For the first nine months, net profit slipped 6 per cent to S$1.21 billion.

Return on equity (ROE) for the first nine months of FY2019 was 5.8 per cent. The group has a target of achieving sustainable double-digit ROE. Last year, CapitaLand's ROE was 9.3 per cent, up from 8.6 per cent in FY2017.

The group is on track to achieve ROE above its cost of equity in the near term. The drivers towards this goal for FY2019 include more handover of residential units in China to buyers, expected in the fourth quarter; continued contributions from the ASB portfolio; and portfolio gains from announced divestments post-Q3 2019.

Giving a split of the components of net profit, the group said that operating Patmi (profit after tax and minority interests) climbed 18.8 per cent to S$277.6 million in Q3 FY2019. This was due chiefly to the consolidation of ASB's results, higher contributions from residential projects in China and one-off fee income from a project in Vietnam.

However, portfolio gains and realised fair value gains eased 58 per cent to S$54.3 million due to the absence of a one-time gain of S$99.2 million from the divestment of Westgate, a Singapore retail asset, to CapitaLand Mall Trust in August 2018. Unrealised revaluation gains and impairments amounted to S$2 million in Q3 FY2019 compared with negative S$700,000 in Q3 FY2018.

Revenue for the quarter expanded 37.1 per cent to S$1.73 billion, mainly due to higher contributions from development projects in China, and contributions from ASB and the group's multifamily portfolio in US. The core markets of Singapore and China accounted for 75.6 per cent of the S$1.07 billion total earnings before interest and tax (Ebit) for the quarter.

Earnings per share fell to 6.6 cents in Q3 FY2019 from 8.7 cents in Q3 FY2018. Net asset value per share dipped to S$4.49 as at end-Sept 2019 from S$4.55 as at end-Dec 2018. The counter closed unchanged on Tuesday at S$3.69. CapitaLand released its results before the market opened.

"Year to date, we have divested more than S$5.2 billion worth of assets and released S$2.4 billion of net capital back to the group. This will enhance our financial flexibility to seize potential opportunities ahead," said Mr Lee.