CapitaLand quarterly profits seen sharply lower

August 1, 2008
CapitaLand quarterly profits seen sharply lower
Slower sales, absence of one-time gains cited; CityDev seen holding
steady

(SINGAPORE) South-east Asia's biggest property developer, CapitaLand,
should report sharply lower quarterly profits as home sales slowed,
and as it is unable to repeat large one-off gains recorded a year
ago.

But earnings for its main rival City Developments, Singapore's No 2
developer by stock market value, are expected to hold steady as it
books income from strong mass market sales during the four-year
property boom.

CityDev, unlike other Singapore developers, does not book revaluation
gains as profit unless the property is sold.

A worsening economic outlook has led to a steep drop in home sales
volumes, with some analysts predicting home prices will fall by up to
40 per cent over the next three years.

'CapitaLand and other developers are finding market conditions this
year tougher than expected,' said Nomura analyst Tony Darwell, who
sees the price of luxury apartments falling 32 per cent by 2010.

Analysts do not give quarterly estimates for Singapore property firms
because it is hard to predict when they will book profits from their
various projects.

CapitaLand is expected to post a 64 per cent drop in full-year to
December 2008 earnings to S$1.02 billion from S$2.8 billion last
year, according to the average of 16 analysts polled by Reuters
Estimates. Its 2007 results had been boosted by US$1.1 billion in one-
off revaluation gains.

'There were very substantial revaluation gains which gave the second
quarter a substantial boost last year. There won't be much of that
this year,' said JPMorgan analyst Chris Gee, adding that
contributions from Australia and China will also be weaker.

AustraLand, 54 per cent owned by CapitaLand, reported a 79 per cent
plunge in earnings this week and announced a rights issue to raise up
to A$557 million.

CapitaLand has committed to subscribe to A$302 million in the issue,
which could boost its stake in AustraLand to 70 per cent.

'This highlights risks of possible asset writedowns, especially
developers with regional exposure . . . and further funding needs
going forward, especially for CapitaLand's Reits,' said Credit Suisse
analyst Tricia Song.

CapitaLand had in the past years spun off its assets into real estate
investment trusts such as CapitaMall, CapitaCommercial and Ascott
Residence, but there are concerns that such trusts may face financing
problems due to the global credit crunch.

CityDev is expected to post a 1.8 per cent rise in full-year 2008
earnings to S$738 million, according to analysts polled by Reuters,
with earnings supported by demand for its mass market residential
projects launched earlier this year.

'We favour CityDev as the mass market segment is still resilient.
Mass market sales are predicated on economic drivers and we're still
seeing continued GDP growth in Singapore,' said DBS Vickers analyst
Adrian Chua.

Keppel Land, Singapore's third-biggest property developer by market
value, posted on Wednesday a 16.4 per cent fall in quarterly profit,
reflecting a decline in property sales in Singapore and abroad.

CapitaLand shares have dropped around 10 per cent so far this year
amid a global equity market selloff fuelled by worries about slowing
economic growth and the US sub-prime mortgage crisis. CityDev shares
lost about 20 per cent in the same period.