Published November 1, 2008

CapitaLand's Q3 profit falls 25.6% on shrinking home sales


CAPITALAND, Singapore's largest developer, yesterday said that net profit for its third quarter ended Sept 30, 2008 fell 25.6 per cent to $419.4 million, from $563.9 million a year ago as home sales fell.

Revenue in Q3 2008 fell to $597.2 million, down 33.3 per cent from $895.8 million in Q3 2007. Turnover was hit by lower sales revenue from development projects in core markets.

But the decline was mitigated by stronger rentals from investment properties and higher fee-based income from real estate investment trusts (Reits) and funds under management, the company said.

Earnings for Q3 2008 were also boosted by gains from the divestment of Capital Tower Beijing in China and 1 George Street in Singapore, as well as the injection of the Raffles City properties in China into the Raffles City China Fund.

The divestments also helped the company increase its cash position to $4.2 billion. But earnings were also partially offset by impairment losses for some investments in Japan and China and higher finance costs.

Earnings per share for the third quarter fell to 14.9 cents, from 20.1 in Q3 2007. CapitaLand's assets under management stood at $24.8 billion as at Sept 30, 2008, up 18 per cent compared to the previous quarter.

For the first nine months of 2008, CapitaLand's net profit fell 43.3 per cent to $1.2 billion, from $2.1 billion a year ago. Revenue for the first nine months similarly fell 17.0 per cent to $2.0 billion, from $2.5 billion for the first three quarters of 2007.

So far this year, CapitaLand's Singapore residential unit has contributed the most to revenue. But buying sentiment is expected to remain cautious in Q4 2008, the developer said.

But the Singapore residential unit expects its earnings to benefit from the progressive recognition of strong sales achieved over 2006 and 2007, when the company had accelerated its launches to tap into the then-buoyant market.

Revenue recognition for The Seafront on Meyer is expected to commence in 2009. CapitaLand may progressively release units at The Wharf Residence and Latitude condominiums for sale in Q4 2008, the developer said. Its development at the former Farrer Court site is also expected to be launch-ready in 2009.

CapitaLand is well-positioned to ride out the global financial and economic uncertainties, said chairman Richard Hu.

'It has the strong balance sheet, liquidity and diversified sources of funding necessary to act on investment opportunities that will arise in the current capital-constrained environment,' he noted.

Chief executive Liew Mun Leong pointed out that the company divested mature properties in Singapore, China and Malaysia and increased its cash position to $4.2 billion in the third quarter. It also reduced its debt to equity ratio to 0.51, from 0.68 in H1 2008.

'This strong balance sheet will be particularly useful in the current global financial crisis which has brought down not only Wall Street's blue-chip financial institutions but also created in its wake a global recessionary environment,' Mr Liew said.

'With the situation deteriorating rapidly, we are strategically watching the distressed markets, very carefully seeking out opportunities to make the right acquisitions at the right price.'

CapitaLand will continue to seek out opportunities as before, focusing capital and human resources into its existing established sectors of residential, retail, commercial, hospitality, integrated developments and financial services in core markets, he added.

CapitaLand shares closed unchanged at $2.85 yesterday. The stock has lost 54.6 per cent so far this year.