News: Capitaland’s earnings forecasted to rise by 19% in 2018-2020

Dec 6, 2018

La Botanica in Xi’an is one of CapitaLand’s latest residential developments in China. (Photo: CapitaLand)

UOB KayHian analysts expect Capitaland’s net profit to grow by about 19 percent in 2018 to 2020 on the back of robust residential sales in China, offshore property purchases and the highly-anticipated opening of Jewel Changi Airport, reported Singapore Business Review.

Based on the property developer’s latest financial results, its earnings increased by 13.6 percent year-on-year to $362.22 million in Q3 2018 due to gains from asset recycling, as well as contributions from investment properties acquired in Singapore, China and Germany.

The fourth quarter of 2018 is also viewed as a good time for CapitaLand as it’s expected to deliver more than 7,000 residential units in China with a combined value of $3.17 billion, of which $1.28 billion will be recognised.

As for the company’s investment properties, Capitaland’s 41.7 percent owned Raffles City China Investment Partners III has formed a 50:50 joint venture with Singapore sovereign wealth fund GIC to acquire Shanghai’s tallest twin towers for $2.54 billion.

The development comprises two 50-storey Grade A office towers standing on top of a seven-storey shopping mall. Excluding parking space, the project has a total gross floor area (GFA) of 312,717 sq m.

“Management expects physical completion and office space in Q2 2019 and the launch of retail space between Q2 and Q3 2019,” said the analysts. “We estimate a net profit income (NPI) yield of 2.0 percent to 3.0 percent during the ramp up phase from H2 2019 to 2020 onwards, before trending to approximately 4.0 percent from 2021.”

In addition, Capitaland’s net profit is poised to benefit from the strong leasing pre-commitment of around 90 percent for Jewel Changi Airport’s retail spaces.

Targeted to open by early-2019, the mixed-use 10-storey project sits on a 3.5ha site with a GFA of 137,100 sq m. These consist of a hotel (5,600 sq m), retail premises (90,000 sq m), indoor gardens and attractions (22,000 sq m), plus airport operations facilities (19,500 sq m).

“For the retail component, our channel checks suggest that the tenant mix will be geared towards affordable and accessible luxury segments to prevent repetition of tenants from other terminals,” noted analysts, adding that average signing rents are at about $20 to $30 psf per month.

Overall, the integrated project will house over 280 businesses, of which more than 30 percent are F&B outlets. Among the notable tenants are Nike, Tiger Beer, Pokemon, design retailer Naiise, gallery store Supermama and artisanal chocolatier Laderach.

 

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Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email romesh@propertyguru.com.sg

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