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CAPITALAND, Singapore's biggest property group, emerged from a challenging first quarter with a net profit of $42.9 million.
But the net profit was 83 per cent below the previous corresponding period's $247.5 million for a variety of reasons: lower sales from development projects; a drop in rents from commercial properties and services residences; a marked-to-market loss of $14.5 million relating to hedging; and the inclusion in the previous Q1 of $141.4 million in divestment gains and a foreign exchange gain of $35.6 million.
Q1 earnings per share fell to 1.2 cents from Q1 2008's 7.3 cents.
Revenue for the three months slid 23 per cent to $487 million from $631.3 million a year earlier.
Analysts said that earnings were well under expectations.
The Q1 net profit came to just 10 per cent of consensus profit estimates for the full year and 13 per cent of Citigroup's full-year estimates, for example.
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'However, they (CapitaLand) were hit by $14.5 million of marked-to-market loss relating to forward contracts for hedging against the renminbi exposure as well as an impairment loss of $3.1 million on an investment in China,' noted Citigroup analyst Wendy Koh. 'Adding back, net profit would amount to $60.5 million, about 14 per cent of (full-year) consensus estimates.'
Ms Koh maintained her 'sell' call on the stock.
Likewise, Macquarie Research yesterday downgraded its FY2009 earnings estimates by 29 per cent to account for weak market conditions across most of CapitaLand's business units. Analyst Soong Tuck Yin maintained his 'neutral' recommendation on the stock.
With the exception of CapitaLand Financial, all of the group's other business segments - including residential, retail and China units - posted year-on-year declines in earnings before interest and tax (Ebit).
CapitaLand chief executive Liew Mun Leong said that the company does not expect a quick and sharp turnaround in global property markets. 'Homebuyer sentiments in the group's key markets of Singapore, China and Australia remained cautious in Q1 2009 and, as expected, were reflected by low transaction volumes,' he said.
The developer will launch its residential sales in Singapore 'in close response to market demand', he added. CapitaLand also expects to see maiden contributions from The Orchard Residences and The Seafront Meyer in FY2009, as well as progressive recognition of its China projects following stronger sales in Q1 this year. These should help make up for the weaker Q1 results, analysts said.
CapitaLand's gearing fell from 47 per cent at end-December 2008 to 32 per cent at end-March 2009, helped by its recent $1.84 billion rights issue. 'The group has the financial flexibility to consider tactical/strategic growth opportunities, distressed assets and mergers and acquisitions,' said analyst Mr Soong. 'We think CapitaLand is likely to focus its efforts mainly in China, Japan and Vietnam.'
CapitaLand lost six cents, or 2.3 per cent, to close at $2.59 yesterday.
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