CapitaLand Q1 update: what’s the business outlook for the rest of 2020?

Singapore real estate conglomerate CapitaLand said in a Q1 2020 financial update posted on Monday 04 May 2020 that its operating performance across all its markets have been ‘affected in various degrees’ by social distancing, travel and commercial restrictions.

The group said that the impact was primarily concentrated within its residential, retail and lodging businesses.

Meanwhile, offices, business parks, logistics, multifamily properties and fund management business have ‘remained relatively resilient’ during the quarter.

Following the update, CapitaLand’s share price opened 2.1% higher on Tuesday 05 May. Shares are trading at S$2.91 as at 13:30 on Tuesday, based on IG data.

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Singapore: lower residential and retail traffic

In Singapore, there has been lower footfall in residential sales offices due to increased social distancing. All sales offices were also closed with the start of Singapore’s so-called ‘circuit breaker’ measures on 07 April 2020.

On the retail front, an estimated 25% of tenants categorised as essential services remained open during this ‘circuit breaker’ period. Shopper traffic for the first quarter is down 10.8% on a year-on-year basis.

In Singapore, there remained a healthy level of committed occupancy in office and business space assets in the first quarter.

On 05 May 2020, the group announced that 79 Robinson Road, a new commercial building located in Singapore’s Central Business District, has received its Temporary Occupation Permit (TOP) on 28 April 2020. The development is jointly owned by CapitaLand, Mitsui & Co., Ltd. and Tokyo Tatemono Co., Ltd.

China: on the road to recovery

Towards the end of the first quarter, China – the group’s largest market, ended its nationwide lockdown. On this note, CapitaLand’s trading results have begun to recover, with improved residential sales and shopper traffic reported in March 2020.

Residential sales offices reopened progressively in March. Sales of close to RMB900 million were registered in the first quarter of 2020, more than the combined value of January and February.

On the retail front, all 15 malls which were closed during the nationwide lockdown in February 2020 have reopened. As of 19 April 2020, more than 85% of tenants are back in operation. Q1 2020 shopper traffic is 52% lower on a year-on-year basis.

In terms of office and business space performance, approximately 95% of CapitaLand’s office tenants and 86% of business space tenants have resumed work since March.

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Business outlook for the rest of 2020

‘While our financial position continues to be healthy, our business activities have been affected. This will in turn have an adverse impact on our financial performance for the year, potentially including but not limited to our profitability, credit metrics, the valuation of our investment properties and capital recycling,’ the group said.

It added that it expects retail and lodging businesses to continue facing headwinds in the second quarter of 2020 as regulations on social distancing and travel will remain tight.

‘Overall, we expect our diversified portfolio to stay resilient, although the extent of the financial impact on the group for 2020 will depend on the severity and length of the economic downturn and the speed and strength of the subsequent recovery.

The group will report details in its 1H 2020 financial results.

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