CapitaLand Q2 Profit Falls 43.5% To $515.2m

Source : The Business Times, August 2, 2008

Group hopes to list Malaysia retail Reit on Bursa Malaysia by end-2008

CAPITALAND group president and CEO Liew Mun Leong has urged analysts and journalists 'not to be overinfected with what's happening in the US'. He made this call yesterday at the property group's briefing on its results - which saw second-quarter net profit falling 43.5 per cent year-on-year to $515.2 million.

'Despite the cautious market sentiment, we have a positive outlook as our business units are competitively positioned and geographically diversified,' said Mr Liew.

Mr Liew: 'Our business units are competitively positioned and geographically diversified.'

CapitaLand's Q2 net profit drop was due mainly to lower fair value gains from the revaluation of investment properties, lower portfolio gains and developments profits, and the absence of writeback of previous provisions. 'Lower revaluation gains were partly a result of the moderation in price increase for the Singapore property market and partly because the group divested some of its investment properties in 2007,' the group said.

First-half net profit also declined 49.8 per cent year-on-year to $762.7 million. Mr Liew pointed out that 2007 was an exceptional year.

The group posted return on equity of 15 per cent in H1 2008, down from 38 per cent in the corresponding year-ago period but slightly ahead of the 14.5 per cent achieved for full-year 2006.

Excluding revaluation gains, CapitaLand's H1 2008 net profit would have been $345.3 million, down 19.7 per cent from H1 2007, which Mr Liew termed a 'commendable result'.

Overseas contribution to earnings before interest and tax rose 10.4 per cent year-on-year to $695.8 million in H1 2008. The increase came mostly from China, chiefly due to fair value gain of $297 million (at earnings before interest and tax or Ebit level) for Raffles City Shanghai, which is being sold to the Raffles City China Fund. However, this was partly offset by a lower contribution from Australia. CapitaLand booked a $24.1 million provision for its share of foreseeable losses on Australand's residential development projects.

The group's finance cost rose 43.7 per cent to $270.5 million in H1 2008. Gross debt rose to $11.6 billion as at June 30, 2008, from $8.6 billion a year earlier. Net debt to equity ratio increased from 0.43 as at end-June 2007 to 0.68 as at end-June 2008.

Serviced residences giant The Ascott Group, which CapitaLand took private earlier this year, posted an 87.3 per cent year-on-year drop in Ebit in Q2 2008 to $17.9 million, while H1 2008 Ebit fell 66.3 per cent to $57.4 million. The Q2 2007 figure had included a gain from the sale of Master Golf and Country Club. The deconsolidation of Ascott Residence Trust, which was listed last year, also contributed to the lower H1 2008 Ebit. However, Ascott's Q2 revenue rose 12.5 per cent to $120.5 million, due largely to the group's serviced residence operations in Europe and China. The group sold $138 million of its serviced residences portfolio in H1 2008 and hinted that it was studying further divestments.

CapitaLand China Holdings's revenue fell 63.9 per cent in Q2 2008 and 49 per cent in H1 2008 because of the re-scheduling of launches of a few projects (in Foshan, Chengdu and Ningbo) from H1 2008 to H2 2008. However, the China business posted posted respective year-on-year Ebit gains of 120.4 per cent and 113.3 per cent in Q2 and H1 respectively due largely to the fair value gain from the revaluation of Raffles City Shanghai and better operating performance of commercial properties.

The group's assets under management stood at $21.1 billion as at June 30, 2008, up from $17.7 billion as at Dec 31, 2007.

The group had $3.4 billion cash as at June 30, 2008 - down 21.4 per cent from a year earlier - and that is in addition to the $12 billion balance investible amount in its private equity funds as at the same date - giving it a sizeable warchest for potential acquisitions.

CapitaLand hopes to list its Malaysia retail Reit on Bursa Malaysia by end-2008. CapitaLand chief investment officer Kee Teck Koon said: 'We're looking at an asset size of about RM$2 billion (S$841 million) (based on the three malls we have purchased for this Reit - Gurney Plaza, Mines Shopping Fair and Sungei Wang Plaza). This will make it the largest Reit in Malaysia in terms of asset size.'

Group revenue fell 12.3 per cent in Q2 to $820.1 million. For the first-half, revenue slipped 7.7 per cent to $1.45 billion.

CapitaLand's net asset value per share stood at $3.68 as at June 30, 2008, up from $3.54 as at Dec 31, 2007. The counter closed 23 cents lower yesterday at $5.47. No interim dividend was declared, as was the case in the previous corresponding period.