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CapitaLand Q2 profit slumps on lower fair value gains

SINGAPORE — Property giant CapitaLand yesterday reported that second-quarter profit slumped 36.6 per cent from the corresponding period a year earlier, as lower fair value gains from revaluation of properties outweighed the firm’s better operating performance.

SINGAPORE — Property giant CapitaLand yesterday reported that second-quarter profit slumped 36.6 per cent from the corresponding period a year earlier, as lower fair value gains from revaluation of properties outweighed the firm’s better operating performance.

Net profit for the three months ended June 30 was S$294 million, down from S$464 million a year ago, the developer said in a pre-market filing with the Singapore Exchange. Excluding one-off gains from reclassifying two Chinese properties into investment assets in the second quarter last year, the year-on-year decline in earnings was smaller at 13 per cent.

Operating profit dipped 33 per cent year-on-year to S$171.6 million, but jumped 31.8 per cent after excluding the one-off gains, while revenue rose 9.7 per cent to S$1.1 billion on higher contributions from development projects in Singapore and China, higher rental income from the serviced residence business and higher contribution from its CapitaGreen office building on Market Street.

CapitaLand president and group chief executive Lim Ming Yan said the firm remains committed to its core markets of Singapore and China, as well as the growth markets of Vietnam and Indonesia, despite ongoing headwinds in the global environment.

“Globally, growth remains low but uncertainties are also in the horizon, particularly what’s going to happen in the upcoming November elections in the United States and post-Brexit, how the United Kingdom will negotiate a new arrangement with the European Union. These are issues that will continue to weigh on market sentiment,” he warned.

For China, which accounts for 45 per cent or S$20 billion of CapitaLand’s total assets, currency volatility remains a risk that warrants close watching, noted group chief financial officer Arthur Lang. He added that based on a sensitivity test, a 1 per cent depreciation in the yuan against the Singapore dollar will hit the firm’s net profit by 0.2 per cent and impact shareholders’ funds by 0.9 per cent.

“You will see that over the next few quarters, we will focus on increasing our yuan liability to match the assets that we buy … In the medium to long term, we will also look at yuan-denominated private equity funds,” Mr Lang said.

CapitaLand sold 2,896 homes in the second quarter in China, compared with the 2,764 units sold in the same period last year. It plans to roll out another 3,000 units from its pipeline in the second half of this year, it added.

In Singapore, the group sold 82 homes in the April-to-June period, up from the 37 units offloaded in the second quarter of 2015. Given the continued enforcement of the cooling measures and loan curbs, short-term prospects of the Singapore residential market remain subdued. Against this backdrop, the company will be cautious in seeking opportunities here, noted Mr Wen Khai Meng, chief executive of CapitaLand Singapore.

“We always bid (for land) with the return in mind. We would not just want to maintain market share for the sake of it, so we definitely would not like to overbid just for the sake of getting sites. Given that CapitaLand is in different countries, in different asset classes, our investments should go to the most profitable areas,” he said.

CapitaLand shares ended yesterday’s session S$0.03, or 1 per cent, higher at S$3.18 per share. The benchmark Straits Times Index inched up 0.2 per cent to 2,831.96 points.

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