CapitaLand share price: what to expect from its Q2 results

Real estate company CapitaLand will be reporting its second quarter financial results for the three months ended June 30, 2019, before the start of trading on Wednesday (August 7, 2019).

Headquartered and listed in Singapore, the firm owns and manages a global portfolio worth over S$123 billion (as of June 2019) of assets under management, comprising of integrated developments, shopping malls, lodging, offices, homes, real estate investment trusts and funds.

The group has presence in more than 200 cities in over 30 countries, with a focus on core markets Singapore and China, information on its website says, while it continues to expand into markets such as India, Vietnam, Australia, Europe, and the United States (US).

CapitaLand’s net profit down 7.4% for the previous quarter

The real estate mogul posted a 7.4% decline in net profit for the first quarter, at S$295.6 million, due to lesser operating profit after tax and minority interest (PATMI) and lower writeback of impairments, partially mitigated by gains from asset recycling and revaluation of properties.

Revenue for the first quarter fell 23.8% from the preceding year to S$1.05 billion due to lower revenue contributions from residential projects, as there were fewer units handed over during the quarter compared to the first quarter a year ago.

Recurring rental income from new acquisitions, including CapitaLand’s portfolio of multi-family properties in the US and a commercial property in Europe acquired in 2018, partially mitigated the lower revenue from our residential trading business, the group said.

Earnings per share dipped to 7.1 Singapore cents from 7.5 Singapore cents in the year-ago period.

Purchase of Ascendas-Singbridge to yield returns: DBS report

In a report published on 27 May, 2019, DBS set a target price of S$4.00 for the stock, saying that the merger of CapitaLand and Ascendas-Singbridge ‘heralds a new era of growth for the group’.

CapitaLand completed the purchase of Ascendas-Singbridge from Temasek end of last month, forming one of Asia’s largest diversified real estate groups with over S$123 billion of assets under management.

‘We see a myriad of positives and see the combined entity emerging stronger financially and with an operational scale that puts it among the largest real estate managers globally,’ said market analysts Derek Tan and Rachel Tan in the report.

The bank analysts forecast the real estate group to be able to deliver a return-on-equity (ROE) of between 8.9% and 9.4% over the financial year periods 2019 to 2021, driven by an “efficient” mix of higher proportion of recurring income derived from Ascendas-Singbridge's higher-yielding properties, projected continued asset revaluations, and projected gains of planned asset divestments.

Mergers, sale, new mall opening

CapitaLand made some adjustments to its portfolio this month. The group said it will merge its hospitality trusts Ascott Residence Trust and Ascendas Hospitality Trust, creating a combined entity that is the seventh largest trust on the Singapore Exchange with an asset value of S$7.6 billion.

It also announced it has entered into an agreement to sell its entire stake in Hong Kong-listed Central China Real Estate to existing shareholder Joy Bright Investments, at a price tag of HK$2.83 billion.

On Monday (July 29, 2019), the group said it has achieved a 95% leasing rate for the retail component of Raffles City Chongqing ahead of the mega-mall’s opening in September this year.

CapitaLand’s share price up 18.6% year-to-date

As of Tuesday’s share price of S$3.64, CapitaLand’s shares have risen by 18.6% year-to-date, from S$3.07 on January 2, 2019.

Likewise with other counters on the Singapore Exchange, the stock has been facing volatility this year due to trade tensions between the US and China, as well as Singapore’s soft growth.

CapitaLand shares started the year at S$3.07 before ascending to S$3.70 in April and then sliding lower from May to June, hitting as low as S$3.21.

The resumption of trade talks between the US and China in mid-June this year was cheered on by financial markets. CapitaLand shares were also boosted by the good news, reaching as high as S$3.72 per share.

The completed acquisition of Ascendas-Singbridge on the last day of June also guided the upward climb in CapitaLand’s share price.