RHB: CapitaLand efforts on income beginning to reap rewards

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CapitaLand’s efforts to build a stable, recurring income base are beginning to bear fruit, RHB said in a note on Wednesday, pointing to contributions from eight malls which opened last year and higher fee income.

“We expect the company to selectively acquire a few residential sites in Singapore this year to replenish its residential land bank. We also like its move to actively rationalise its portfolio via divestments, and sharpen its focus in core markets,” it said.

CapitaLand has sold out of most of its launched units in Singapore and it was able to write back S$17 million of provisions for two projects, Victoria Park Villas and Marine Blue, RHB noted.

RHB said first-quarter earnings were broadly in line with its expectations.

CapitaLand reported first-quarter profit after tax and minority interests (PATMI) of S$319.1 million, down 18.8 percent on-year, due to a year-earlier gain of S$160.9 million from the sale of 45 units of The Nassim project. Excluding that gain, PATMI would have been 38 percent higher, the developer said in a filing to SGX on Monday after the market close.

That was on higher development profit in Singapore and higher rental income from malls and offices in China, Japan and Germany, CapitaLand said.

RHB said the stock was one of its top picks among property developers.

“Valuations are attractive, with the stock trading at an around 25 percent discount to our RNAV (revalued net asset value) estimate, while offering a dividend yield of 3.5 percent,” RHB said. It added that CapitaLand’s active share buybacks — 57.6 million shares valued at S$208.8 million year-to-date — are “a sign of deep value,” offering a vote of confidence from management.

RHB rates the stock at Buy with a S$4.20 target price.

CapitaLand shares ended Wednesday at S$3.76.