CapitaLand Group’s chief executive, Lim Ming Yan, expects further moderation in the Singapore’s real estate market this year, and is targeting China as a key profit centre.
Some analysts, however, warn that economic and political uncertainty in China may limit CapitaLand’s pricing capability.
CapitaLand will be scouring for new projects in China and its home base in Singapore, where a government-driven slowdown has forced discounts on recent residential projects.
Lower fair value gains on its property portfolio and loss provisions on projects in Vietnam, China and Kazakhstan have resulted in a 45 per cent slump in net profit for the fourth quarter of 2012.
CapitaLand attributed the decline in fourth-quarter profits to lower contributions from projects completed in 2011, including in Vietnam and Abu Dhabi.
In addition, it reported a S$57.8 million provision for losses involving projects in Vietnam, China and Kazakhstan.
The company’s net profit fell to S$262.7 million for the three months ending December 2012, from S$476.6 million in the same period a year earlier.
For all of 2012, CapitaLand booked a 12 per cent drop in net profit to S$930 million.
The fourth-quarter decline came despite a 5 per cent increase in revenue to S$1.1 billion.
The company saw steady growth in China where home sales accelerated in the second half and doubled for the full-year.
The property developer said it will channel more investments into its newly redefined core businesses, including CapitaMalls Asia (CMA) and its serviced apartment business, Ascott.
Lim Ming Yan, president and group CEO of CapitaLand Group, said: “If we want to bring up the overall performance of the group, I think it’s important that management focuses on the core businesses of the group.
“In areas that we’ve classified as non-core, it is definitely in management’s KPI to resolve some of these issues before the end of the year or substantially get it done before the end of the year.”
However, some analysts warn that government intervention could hurt its earnings.
Eli Lee, an OCBC Bank analyst, said: “In China, we’ve come to see sales over the last year almost double to 3,000 units sold. We have been hearing chatter and seeing some preliminary signs that the government will cool down the market.
“That is injecting some uncertainty, especially in equity prices, in terms of how onerous these measures will be and what impact they will eventually have. In my view, this being the year of political transition in China, they are unlikely to want to rock the boat excessively.”
Despite the global economic uncertainties, CapitaLand said it is still optimistic about growth opportunities in Asia and will be focussing its resources in Singapore (and) China, as well as regional investments in Japan, Malaysia and India.
As for Singapore’s residential market, the company still aspires to gain 8 to 10 per cent of the market share here.
OCBC Bank’s Eli Lee said: “In Singapore, it’s kind of well-known that CapitaLand is struggling with a lot of inventory in D’Leedon and to a small extent, the InterLace as well.
“After the last cooling measures, I think it’s a good sign that they showed some willingness to put some price incentives to take the bitter medicine, so to speak, to sort of get sales moving again.
“They have two more sites in their land bank that are not launched — one in the East Coast and one in Bishan. And in my view, they’re probably reviewing their residential strategy in Singapore and trying to figure out how they’re going to come up with a product that’s compelling enough.”
This is in spite of the government’s latest round of cooling measures.
CapitaLand’s CEO Lim said: “We expect measures to moderate the volume and selling price. We believe that what we have is realistic pricing that will result in a certain amount of sales, and the outcome is that it has definitely helped in moving sales.”
Mr Lim, who took the helm at CapitaLand in January, said the company will avoid venturing into new emerging markets in 2013.
Going forward, Mr Lim said: “If we talk about a completely new market, we have to be a little bit more measured in our approach as a group. But individual units, in the case of Ascott or CMA, they would be in a better position because the threshold to achieve those economies of scale is much lower.”
CapitaLand has declared a final dividend of 7 cents per share, compared to 6 cents a year ago.
Source : Channel NewsAsia – 21 Feb 2013