Capitaland investor day takeaways

Capitaland Raffles City

Morgan Stanley hosted CEO Mr Lee Chee Koon and senior managers for an investor meeting.

Key takeaways

  • CapitaLand is working towards double-digit ROE from current 8%
  • Leveraging on technology to improve productivity and tenant connectivity across mall, office and serviced residence properties
  • Optimistic on Vietnam with contributions rising to S$100m by 2020
  • Pearl Bank Apartment and Sengkang Central launching in 2019
  • Steady growth in Ascott

ROE targets

CapitaLand exceeded their 8% ROE target in 2017 and aims to do so again this year. ROE therefore remains the primary focus of the group, with a double-digit target over the long term.

To achieve the target, management is aiming to actively recycle capital and divest S$3bn of assets every year.

In that regard, China malls in tier 3 cities and US multifamily assets are slated to be divested into funds.

Management also believes that the property market is entering a late-stage cycle, and is pursuing more brownfield opportunities due to quicker turnover time.

About 75% of earnings are cash earnings, or cash Profit After Tax and Minority Interest, excluding revaluation gains, which CapitaLand sees rising over time.

Present cost of debt of 3.1% is seen to be rising to 3.5% by 2019, on the back of a rising global interest rates.

CapitaLand aims to keep net gearing within 0.64x, from 0.51x currently and have 75% of fixed borrowings.

Digital transformation

On the digital side of the company, CapitaLand is using the CapitaStar program to provide data analytics to its mall tenants.

The company is also using technology to optimize energy usage in its office buildings, and is setting up digital platforms to connect its office building tenants as well as the upcoming Lyf co-living serviced apartments.

Vietnam going strong

The company continues to maintain its target exposure mix of 50/50% developed/emerging markets. The group presently had 56.7% of exposure in developed markets in 3Q2018.

Vietnam features strongly, with an expected contribution of S$100m by 2020.

In China, the company is targeting 6,000 to 8,000 units of handovers per year which will likely be supportive of earnings.

Singapore remains a core market, though any investments made will be for recurring income.

Pearl Bank and Senakang Central launching in 2019

The company has obtained all approvals and is close to completing the purchase of Pearl Bank apartments by 4Q18.

They estimate the launch of the development to be around 2Q2019, which by then is hoped that the effects of the cooling measures would have waned.

The project is located close to the CBD and is likely to see some level of base demand if priced well.

Further in the suburbs, a 50/50% tie up with CDL for a Sengkang Central site will yield approximately 700 residential units.

Steady growth in Ascott

Ascott’s RevPAU rose 5.0% compared to the same period last year, boosted by Singapore, China and Europe properties.

Southeast Asia, Gulf Region and India saw declines in RevPAU, but were less than the increase in the earlier mentioned countries.

The company has in its pipeline about 39,000 units under development, which is expected to contribute recurring management fee of approximately S$80m when completed.

Other news

  • Investors seeking Singapore hotel investments on stronger metrics including visitor arrival growth (+7.4% in 9M18), average daily rate (+4.1% YoY to S$277 in Sep) and RevPAR (+6.2% to S$229), according to CBRE. This includes property developers which are seeing strong demand for new hotel sites, especially in the mid-tier segments, and are also considering the conversion of existing sites into hotels (e.g. Singtel Hill Street and Waterloo Apartments). At the top end of the market, a number of sovereign wealth funds are understood to be seeking opportunities, while private and high net-worth buyers are looking to increase their exposure to lower and mid-range hotels. While buying sentiment remains healthy, CBRE noted that the lack of available hotels for sale remained a major hindrance for transaction volumes. (CBRE)
  • ARA Asset Management has sold Beijing Jingtong Roosevelt Plaza, a shopping mall, to Hong Kong-listed Link REIT for RMB2.56b (S$506.7m). The 67,546 sqm shopping mall is located in Tongzhou District and is part of a large mixed-use development which also includes Jincheng offices and four residential towers. The sale will be completed on 23-Jan-19. (The Business Times)
  • CDL Hospitality Trusts (CDREIT) has completed the acquisition of 95% effective interest in Hotel Cerretani Florence, MGallery by Sofitel. (CDL Hospitality Trusts)
  • IFS Capital has completed the sale of its office at Suntec Tower One for S$29.5m (S$2,050 psf on NLA of 14,381 sqf) at unit #10-01/02/03 to Hong Realty. (IFS Capital)

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