CapitaLand share price: key considerations ahead of Q4 results

When will CapitaLand Limited’s Q4 FY2019 results be released?

Singapore real estate group CapitaLand Limited is due to announce its fourth quarter and year-end results for 2019 fiscal year on Wednesday 26 February 2020.

One of Asia’s largest diversified real estate groups, the company owns and manages a global portfolio worth over S$131.7 billion as of 30 September 2019, spanning across the commercial, retail, industrial, and residential sectors.

The group also manages eight listed real estate investment trusts (REITs) and business trusts as well as over 20 private funds. Since it pioneered REITs in Singapore with the listing of CapitaLand Mall Trust in 2002, CapitaLand’s REITs and business trusts have expanded to include Ascendas Reit, CapitaLand Commercial Trust, Ascott Residence Trust, CapitaLand Retail China Trust, and Ascendas India Trust.

Here are three things that are likely to hint of things to come in the upcoming earnings report for shareholders and traders.

1. Q3 FY2019 after-tax profit lower by 7.8%

The group achieved a total PATMI (profit after tax and minority interests) of S$333.9 million in the previous quarter, 7.8% or S$28.3 million lower than Q3 FY2018. The lower profit was largely due to lower portfolio gains recorded during the quarter compared to the same period a year ago.

The operating PATMI of S$277.6 million, however, was 18.8% higher than the corresponding period in 2018. The increase was mainly attributable to the maiden contribution from Ascendas-Singbridge (ASB) – which CapitaLand reportedly acquired in June 2019 for S$11 billion, and higher contributions from development projects in China and fee income from Vietnam.

Revenue for the quarter increased by 37.1% to S$1.7 billion, mainly due to higher contributions from development projects in China and contributions from ASB and the group’s portfolio in USA.

The core markets of Singapore and China accounted for 67.3% of the Group’s revenue in the third quarter of 2019.

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2. Divestments worth over S$100 million

There are several business developments in the three months ending 31 December 2019 that are likely to affect Q4’s total and operating PATMI.

In early-November 2019, CapitaLand announced that it had entered into agreements to divest 30 business park properties in the US and Singapore to its subsidiary, Ascendas Real Estate Investment Trust (Ascendas Reit). The group is expected to reap an estimated gain of about S$95.4 million upon completion of the deal – expected for the fourth quarter itself.

Then, on 20 November 2019, the company announced that it would be selling off its Singapore entertainment and leisure hub The Star Vista to Rock Productions for S$296 million.

The sale was expected to generate for CapitaLand net proceeds of approximately S$145 million, and a net gain of approximately S$32 million.

These divestments are part of CapitaLand’s ongoing ‘asset recycling strategy’ to refresh its investment portfolio, which had as of November 2019, seen S$5.7 billion worth of assets sold off.

The company had previously divested several properties globally, including three malls across China in June 2019, and the Main Airport Centre in Frankfurt a month later.

3. Guidance for FY2020 on COVID-19 impact

The retail sector has been hit hard by the outbreak of the 2019 coronavirus, and CapitaLand, which owns 18 malls in Singapore and 53 malls in China, has found itself in the middle of the business downturn.

To help cushion the lower sales during this period, CapitaLand on 13 February put in place a S$10 million marketing assistance programme to support both retailer-driven promotions and mall-wide marketing initiatives. These include complimentary booking of atrium spaces for retailers and free parking for shoppers during lunch or dinner hours.

The company is also offering additional support, including rental relief, for its Singapore retail partners affected by COVID-19. The rental relief is being disbursed to retailers in a targeted manner, based on their individual needs and circumstances.

These measures may include a review of security deposits, restructuring of rental payments and rental rebates to ease retailers’ cashflow.

These support programmes are in addition to the Singapore government’s proposed 15% property tax rebate to qualifying commercial properties, as part of its Budget 2020 to support food services and retail establishments impacted by COVID-19. CapitaLand said it plans to pass on the full savings of the rebate to retailers operating across its malls.

Chris Chong, Managing Director, Retail, CapitaLand Singapore, has indicated that business at the group’s downtown malls have been ‘affected by lower tourist arrivals’, with the performance of suburban malls proving to be ‘more resilient’.

The real estate group’s share price is down 3.7% year-to-date. It is currently trading at S$3.65 per share.

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