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Published February 23, 2011

CapitaLand Q4 profit drops 41.1%

It books much smaller portfolio gains in the quarter than in Q42009

By KALPANA RASHIWALA


PROPERTY giant CapitaLand yesterday posted a 41.1 per cent year-on-year drop in fourth-quarter net profit to about $552.1 million on the back of lower portfolio gains.

It had booked portfolio gains of $917.6 million in Q4 2009, of which the bulk or $899.8 million was from the flotation of CapitaMalls Asia. In Q4 2010, portfolio gains were much smaller, at $194.2 million, including $132.2 million from the divestment of a majority stake in Raffles City Changning in Shanghai and the sale of 28 serviced residence properties to Ascott Residence Trust.

Revenue rose 36.5 per cent year on year to $1.14 billion in Q4 2010 on the back of higher contributions from the group's development projects in the group's core markets of Singapore, China, Australia and Vietnam.

Full-year 2010 revenue rose 14.4 per cent to about $3.38 billion, thanks to brisk home sales, and contributions from development projects in the four core markets. These included The Interlace, Latitude, The Seafront on Meyer, and The Wharf Residence in Singapore; La Capitale and The Metropolis in China; and The Vista and Mulberry Lane in Vietnam.

Net profit for the year ended Dec 31, 2010 rose 20.9 per cent to $1.27 billion, surpassing the $834 million median estimate and $855.13 million mean estimate of 23 analysts polled by Bloomberg.

Last year, the group posted declines of about 20 per cent in operating profit to $558.3 million and 71 per cent in portfolio gains to $285.6 million, but reported lower impairments. As well, CapitaLand posted revaluation gains of $488.3 million last year (mostly from the Singapore office portfolio under CapitaCommercial Trust and the Raffles City portfolio in China), against a $92.9 million revaluation loss in 2009.

CapitaLand derived about 60.3 per cent of earnings before interest and tax (Ebit) from overseas last year, compared with a 15.3 per cent share in 2009. The group's net debt-to-equity ratio rose from 0.09 at end-2009 to 0.18 at end-2010. Its cash hoard decreased from $8.7 billion to $7.2 billion over the same period.

Net asset value per share rose from $3.16 at end-2009 to $3.33 at end-2010. Earnings per share increased from 26.2 cents in FY2009 to 29.9 cents in FY 2010. On the stock market yesterday, the counter closed seven cents lower at $3.29 amid a broad market fall.

Shareholders will receive a first-and-final dividend of six cents for FY 2010. For FY 2009, they received a total payout of 10.5 cents, comprising a 5.5 cent first-and-final dividend and a five-cent special dividend.

CapitaLand Group president and CEO Liew Mun Leong highlighted that the FY 2010 result marks the fifth consecutive year that the group had delivered net earnings exceeding $1 billion, and that aggregate net earnings over the past five years totalled $7.4 billion, reflecting a compounded annual growth rate of 11 per cent.

In addition to the cash of $7.2 billion on its balance sheet as at end-2010, the group can borrow an additional $6 billion assuming a gearing ratio of 0.5. 'So we have enormous capacity for investment and growth in our business portfolio,' Mr Liew said.

Earnings improved across all property sectors, geographies and strategic business units last year, except for CapitaLand Residential Singapore, where full-year Ebit dipped 5.4 per cent to $351.5 million. Included in Ebit for FY 2009 was the unit's share of revaluation gain in ION Orchard amounting to $71.6 million. Excluding this exceptional gain, the unit's FY 2010 Ebit would be higher than the preceding year by 17.1 per cent mainly due to higher revenue recognised in FY 2010.

The unit sold 800 homes in Singapore last year and plans to launch 1,700 units this year, including a project in Bedok Town Centre with about 500 apartments slated for release in the third quarter of this year. It is also gunning to release a condo with about 150 units on the Marine Point site early next year.

CapitaLand Residential Singapore CEO Wong Heang Fine said the group is in a very strong financial position to acquire more prime sites in Singapore including those near MRT stations or at the city fringe.

Since the Singapore government announced property cooling measures on Jan 13, the group has sold 74 homes here. These include 23 of 150 units released at d'Leedon on Feb 18 (including a penthouse at over $6 million) and 12 of 250 units released at The Interlace on Feb 19.

CapitaLand China Holdings, which sold 2,920 homes last year, is planning to launch another 4,000 units this year. This will include new launches such as The Paragon in Luwan, Imperial Bay in Hangzhou, Yujinsha in Guangzhou as well as new phases of The Metropolis in Kunshan, The Pinnacle in Shanghai, The Loft in Chengdu and Beaufort in Beijing. In Vietnam, CapitaLand plans to launch more than 1,000 homes this year.

CapitaLand has a mixed development project called Raffles City Bahrain in Manama Bay. Work on the project was stopped two years after the completion of substructure works, because of the global financial crisis, and the current book value of the development is insignificant at 0.1 per cent of CapitaLand's group asset size of $31.7 billion as at end-2010.