This article was originally published on Wednesday, 20 February 2019 at 8:01 A.M. SGT; it has since been updated.
CapitaLand reported on Wednesday fourth quarter net profit increased 71.2 percent on-year to S$475.65 million on better operating performance, higher gains from asset sales and the revaluation of its investment properties. The results beat some analyst forecasts.
Revenue for the quarter ended 31 December increased 34 percent on-year to S$1.62 billion, it said in a filing to SGX before the market open on Wednesday.
For the full year, CapitaLand reported net profit increased 12.3 percent on-year to S$1.76 billion on stronger recurring income from newly acquired and operational properties in Singapore, China, Germany and the U.S., higher contributions from residential projects in China and Vietnam, higher gains from asset sales and the revaluation of investment properties.
Revenue for the full year rose 21.3 percent to S$5.60 billion, getting an additional fillip from consolidating revenue from CapitaLand Mall Trust, CapitaLand Retail China Trust and RCS Trust, it said.
That beat a forecast range from four analysts of S$942 million to S$1.26 billion for net profit; the analysts’ revenue forecasts were in a S$5.17 billion to S$6.39 billion range.
“CapitaLand has achieved good results amidst a challenging economic and market environment. This achievement is due primarily to our diversified asset base, disciplined approach in asset recycling and capital allocation, and strong operating expertise,” Ng Kee Choe, chairman of the company, said in the statement.
CapitaLand proposed a dividend of 12 Singapore cents, unchanged from the previous year.
Singapore retail improves
In Singapore, the retail portfolio showed improvement for a second straight quarter in the last period of 2018, with tenants’ sales per square foot up 1.3 percent on-year, while national retail sales fell 0.2 percent in November, CapitaLand said.
“Given that CapitaLand’s shopping malls are well-connected to public transport networks and located in large population catchments or within popular shopping and tourist destinations, the group expects its retail portfolio to remain resilient amidst a sluggish retail environment,” the statement said. “In addition, Funan and Jewel Changi are on track to open in the first half of 2019, which will then begin to contribute to the group’s recurring income.”
The Singapore office portfolio is mainly held through CapitaLand Commercial Trust, which saw its committed occupancy rise to 99.3 percent by end-December from 97.3 percent a year earlier, it said.
Singapore’s residential segment saw home prices fall 0.1 percent on-year in the fourth quarter, with new home sales declining, it noted. That was after the government introduced a fresh round of property cooling measures in July.
“The group expects new home sales volumes and private home prices to further moderate in 2019, although property launches are expected to pick up in 2019. Residential projects in good locations, with good site attributes are expected to enjoy healthy take up rates,” it said, noting it acquired two sites it expects to launch this year.
China retail is ‘healthy’
CapitaLand said its China retail performance remained “healthy,” with its shopping mall portfolio on the mainland posting same-mall tenant sales growth of 4.0 percent on-year in the fourth quarter. During the year, it said it opened malls in Shanghai, Cahngsha and Beijing.
For residential, fresh property cooling measures were expected to slow the market and restrict price growth, but take-up rates were strong, with the company’s launched units already 92 percent sold, it said.
“In 2018, CapitaLand stepped up its pace of new investments in China, successfully acquiring both residential and commercial sites in Tier 1 and 2 cities,” it said.
Vietnam residential remains ‘robust’
CapitaLand said it expected the growth momentum in Vietnam to pick up, with the residential market remaining “robust,” supported by a young and growing middle class.
As of end-year, 98 percent of the launched units in Vietnam were sold and take-up was expected to remain healthy, it said.
“The group will continue to strengthen its presence in Vietnam via the gateway cities of Hanoi and Ho Chi Minh City, primarily through investment in its residential business,” CapitaLand said. “At the same time, the group also plans to expand its commercial footprint in both gateway cities, which are currently underserved in terms of Grade A offices with an increasing number of multinational companies setting up their businesses in Vietnam.”
In the outlook, Lee Chee Koon, president and CEO of CapitaLand, pointed to its proposed acquisition of Ascendas-Singbridge, which will create Asia’s largest diversified property group, with assets under management of more than S$116 billion.
“The transaction will strengthen our presence and pipeline in our core markets – Singapore and China. It will give us immediate scale in new economy sectors such as logistics and business parks, and in growth markets such as India, the U.S. and Europe,” Lee said.