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02-08-13, 11:50
http://www.businesstimes.com.sg/archive/friday/premium/top-stories/capitaland-rattles-few-blunt-home-truths-20130726
Published July 26, 2013
CapitaLand rattles off a few blunt 'home truths'
By Kalpana Rashiwala
[SINGAPORE] In a candid assessment of the Singapore residential property market, CapitaLand yesterday warned of headwinds in the near term.
Following the introduction of a 60 per cent cap on total debt servicing ratio that financial institutions must apply before issuing property loans, effective June 29, CapitaLand said in its latest financial results statement that "prices and sales volume of Singapore residential property are expected to moderate as the cumulative impact of the various property measures continue to be played out in the coming months".
Analysts note that CapitaLand has been quite responsive to market changes and introduced discounts at its projects d'Leedon, Interlace and, most recently, Sky Habitat in Bishan.
Referring to Sky Habitat, CapitaLand Residential Singapore CEO Wong Heang Fine said: "We are doing selective unit discounts - but not on a mass basis."
BT understands that CapitaLand is testing the market with a selected 100 units at Sky Habitat for release at below $1,500 per square foot. Prior to this, the project had been selling at around $1,600 psf on average.
A CapitaLand Singapore spokesman said: "We streamlined our promotion scheme two weeks ago. Selected units are marketed at a range of prices - such promotions are not new. As this is an ongoing promotion, we are monitoring the response."
According to government data, as at end-June, 166 of the 250 units released in the 509-unit project were sold.
Meanwhile, CapitaLand posted a 0.7 per cent dip in second-quarter net profit to $383.1 million on the back of lower portfolio gains and one-time losses of $27.7 million incurred in the convertible bonds repurchase in June.
Revenue came to $1.18 billion, up 37.1 per cent from a year ago.
First-half net profit totalled $571.3 million, an increase of 10.1 per cent from a year ago. Revenue rose 22.7 per cent to $1.8 billion.
Earnings before interest and tax (Ebit) climbed 2.4 per cent to nearly $1.08 billion. Singapore and China operations accounted for 77.4 per cent of this amount.
At yesterday's results briefing, CapitaLand president and group CEO Lim Ming Yan said that the group would continue its focus on Asia, because of growth, urbanisation and consumer demand. And the group is in a position to tap these opportunities, given its strength in integrated and mixed developments.
Unlike their Australian or American counterparts, Asian cities, particularly Shanghai and Beijing, are so densely populated that the authorities have no choice but to put in significant transport infrastructure, said Mr Lim.
Once that happens, there is a need for higher-density developments, which makes a strong case for integrated/mixed developments.
"This is where it will play to our strength," said Mr Lim.
It will not be easy for anyone to replicate the group's full competencies across different asset classes, he added.
In Singapore, CapitaLand will be launching in the current half another condo, next to Sky Habitat, which Mr Wong said would "be targeted at a different market sector". The group also plans to release its Marine Point project.
Despite the challenging near-term outlook, CapitaLand said that long-term prospects for the Singapore residential property market remain positive and that there would be sustainable demand for new homes.
It cited Singapore's sound economic fundamentals and policies to support population growth. "Hence, CapitaLand Singapore will continue to source for well-located sites to build its pipeline."
In its other key market of China, the group's 2013 target is to launch about 3,000 homes.
At yesterday's briefing, CapitaLand officials highlighted that the group took a one-time loss arising from the convertible bonds repurchase to enjoy future lower interest expense and lengthen its debt maturity. In all, it would have reduced annual interest expense by about $18 million over the next seven years.
Interest cover has fallen from 5.5 times for the whole of last year to 4.8 for the first half of this year. The net debt-to-equity ratio was 0.45 times at end-June, unchanged from end-December.
Earnings per share for Q2 dipped to nine cents from 9.1 cents a year ago. However, first-half EPS rose to 13.4 cents from 12.2 cents. Net asset value per share rose to $3.69 at end-June from $3.55 at end-December.
In the stock market yesterday, the counter ended one cent higher at $3.22. CapitaLand released its results before the start of trading.
Mr Lim also revealed that the group was targeting a return on equity of 8-12 per cent on a sustainable basis. Over the past five financial years, ROE has ranged from 6.2 per cent (FY2012) to 12.2 per cent (FY2008).
He also indicated that the group was comfortable with a two-thirds/one-third mix between operating assets and projects under development. That is, two thirds of projects will be contributing and one third still under development and hence not contributing yet. "You need that one-third because it will give you growth in the future."
Published July 26, 2013
CapitaLand rattles off a few blunt 'home truths'
By Kalpana Rashiwala
[SINGAPORE] In a candid assessment of the Singapore residential property market, CapitaLand yesterday warned of headwinds in the near term.
Following the introduction of a 60 per cent cap on total debt servicing ratio that financial institutions must apply before issuing property loans, effective June 29, CapitaLand said in its latest financial results statement that "prices and sales volume of Singapore residential property are expected to moderate as the cumulative impact of the various property measures continue to be played out in the coming months".
Analysts note that CapitaLand has been quite responsive to market changes and introduced discounts at its projects d'Leedon, Interlace and, most recently, Sky Habitat in Bishan.
Referring to Sky Habitat, CapitaLand Residential Singapore CEO Wong Heang Fine said: "We are doing selective unit discounts - but not on a mass basis."
BT understands that CapitaLand is testing the market with a selected 100 units at Sky Habitat for release at below $1,500 per square foot. Prior to this, the project had been selling at around $1,600 psf on average.
A CapitaLand Singapore spokesman said: "We streamlined our promotion scheme two weeks ago. Selected units are marketed at a range of prices - such promotions are not new. As this is an ongoing promotion, we are monitoring the response."
According to government data, as at end-June, 166 of the 250 units released in the 509-unit project were sold.
Meanwhile, CapitaLand posted a 0.7 per cent dip in second-quarter net profit to $383.1 million on the back of lower portfolio gains and one-time losses of $27.7 million incurred in the convertible bonds repurchase in June.
Revenue came to $1.18 billion, up 37.1 per cent from a year ago.
First-half net profit totalled $571.3 million, an increase of 10.1 per cent from a year ago. Revenue rose 22.7 per cent to $1.8 billion.
Earnings before interest and tax (Ebit) climbed 2.4 per cent to nearly $1.08 billion. Singapore and China operations accounted for 77.4 per cent of this amount.
At yesterday's results briefing, CapitaLand president and group CEO Lim Ming Yan said that the group would continue its focus on Asia, because of growth, urbanisation and consumer demand. And the group is in a position to tap these opportunities, given its strength in integrated and mixed developments.
Unlike their Australian or American counterparts, Asian cities, particularly Shanghai and Beijing, are so densely populated that the authorities have no choice but to put in significant transport infrastructure, said Mr Lim.
Once that happens, there is a need for higher-density developments, which makes a strong case for integrated/mixed developments.
"This is where it will play to our strength," said Mr Lim.
It will not be easy for anyone to replicate the group's full competencies across different asset classes, he added.
In Singapore, CapitaLand will be launching in the current half another condo, next to Sky Habitat, which Mr Wong said would "be targeted at a different market sector". The group also plans to release its Marine Point project.
Despite the challenging near-term outlook, CapitaLand said that long-term prospects for the Singapore residential property market remain positive and that there would be sustainable demand for new homes.
It cited Singapore's sound economic fundamentals and policies to support population growth. "Hence, CapitaLand Singapore will continue to source for well-located sites to build its pipeline."
In its other key market of China, the group's 2013 target is to launch about 3,000 homes.
At yesterday's briefing, CapitaLand officials highlighted that the group took a one-time loss arising from the convertible bonds repurchase to enjoy future lower interest expense and lengthen its debt maturity. In all, it would have reduced annual interest expense by about $18 million over the next seven years.
Interest cover has fallen from 5.5 times for the whole of last year to 4.8 for the first half of this year. The net debt-to-equity ratio was 0.45 times at end-June, unchanged from end-December.
Earnings per share for Q2 dipped to nine cents from 9.1 cents a year ago. However, first-half EPS rose to 13.4 cents from 12.2 cents. Net asset value per share rose to $3.69 at end-June from $3.55 at end-December.
In the stock market yesterday, the counter ended one cent higher at $3.22. CapitaLand released its results before the start of trading.
Mr Lim also revealed that the group was targeting a return on equity of 8-12 per cent on a sustainable basis. Over the past five financial years, ROE has ranged from 6.2 per cent (FY2012) to 12.2 per cent (FY2008).
He also indicated that the group was comfortable with a two-thirds/one-third mix between operating assets and projects under development. That is, two thirds of projects will be contributing and one third still under development and hence not contributing yet. "You need that one-third because it will give you growth in the future."