Wednesday, August 29, 2012

Demystifying Capitaland Group

Capitaland Limited was started in the year 2000. It was the result of the merge of DBS Land and Pidemco Land. It is one of the Asia’s largest real estate companies situated in Singapore. The company is also in the hospitality business. However, their major focus and core business is real estate development and financial services. By 2008 its total revenue was stated as S$2, 752.3 million with operating income as S$2, 213.5 million. The company’s portfolio includes offices, homes, shopping malls, serviced residences and mixed developments. Its projects are established in 110 cities in over 20 countries. Capitaland has a strong asset base of real estate expertise, money power and wide market network to develop real estate financial products and services in Singapore and the region.

Current Scenario: The current share value of the company is 2.99 (SGD). ART and Capitaland have decided to shake hands for some of the new ventures. ART would sell the Somerset Grand Cairnhill site to Capitaland for redevelopment. This deal would boost ART’s exposure to the Asian markets of Singapore and China as this deal is worth S$688 million. This deal should boost FY12 earnings estimates to S$684. 4 million and raises TP marginally to S$3. 39. There are two major impacts on CapitaLand from these contracts. The first one is that the company would recognize a gain of S$98. 9 million from the sales. Now, the second impact would be that this deal would boost the company’s residential land bank in Singapore.

Future Scope: The Company has planned to purchase the site for S$359 million. With several successful and new ventures planned inline CapitaLand is sure that this development could rake in PBT of S$80 million and boost RNAV by 1.3 to 1.4 scouts. Upo0n completion of the several projects planned for FY12 the profit is estimated to rise from the current S$ 669.9 million to S$684. 8 million and RNAV would be adjusted to S$ 5.21. Capitaland has entered 2012 on a strong footing with a cash flow of S$6.3 billion and debt equity ratio of less than 0.50. The group recorded a net profit of S$1.06 billion after deductions Strong profitable and prudent capital management has ensured that the company’s balance sheet remains robust to ride out market volatility in 2012. The group has maintained excellent financial flexibility.
More expansions in China are planned. China is also CapitaLand’s second most profitable geography after Singapore. It has an EBIT contribution of S$ 813 million. The company’s China malls continued to perform well in 2011. They have registered a total property income growth of 20.7% compared with the previous year.

Conclusion: The mass market value of Housing business has been given a boost during this year when the company acquired a strategic 40% stake. The company is confident of the long-term prospects of the property market in Singapore and China and would devote the bulk of its resources and efforts when deploying new investment capital in the two markets going forward

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