DBS calls buy on CapitaLand on better earnings quality

SINGAPORE (Nov 11): DBS Group Research has a buy call on CapitaLand after the property group posted a robust set of earnings for its third quarter of 2016 amid portfolio-wide improvement.

According to a report by The Business Times, the research house believes that CapitaLand offers good value, trading at an attractive 0.7 times its price-to-book ratio and 0.6 times its price to revalued net asset value.

“The group’s strategy to focus on growing its commercial portfolio is bearing fruit, offering better earnings visibility. Coupled with opportunistic asset recycling of mature assets into its listed REITs (real estate investment trusts)/funds, there is ample upside potential to our earnings estimates,” DBS said.

It is keeping its buy call, with a target price of S$3.60 (RM10.97) a share. CapitaLand was trading around S$3.08 a share, up five Singapore cents, or 1.65%, at 4.10pm yesterday.

CapitaLand reported on Wednesday that its net profit for the third quarter ended Sept 30, 2016, rose 28.4% to S$247.5 million, compared with S$192.7 million a year ago. Revenue was up 27.7% to S$1.4 billion, from S$1.1 billion previously.

The report by The Business Times said DBS also sees growing recurring revenues from the group’s retail mall portfolio and serviced residence owner-operator Ascott. These, it notes, offer strong income visibility in the medium term.

“The operating performance of its malls will improve as the properties reach maturity, boosted by the completion of four Raffles City mega developments in China in the medium term.”

This article first appeared in The Edge Financial Daily, on Nov 11, 2016. Subscribe to The Edge Financial Daily here.