SINGAPORE (Thomson Financial) - Shares of CapitaLand Ltd, Southeast Asia's biggest property developer, rose sharply after it reported earlier today that its second quarter net profit surged 480.6 percent to 912.6 million Singapore dollars, beating analyst estimates.
At 4.47 pm, CapitaLand was up 25 cents or 3.45 percent at 7.50 dollars with 26.46 million shares exchanged.
The second quarter results were bolstered largely by fair value gains from the revaluation of office properties, and on the back of strong residential sales here and in China.
Excluding the fair value gains, net profit for the period came in at 267.2 million dollars compared to 157.2 million last year.
Revenues for the second quarter rose 21.1 percent year-on-year to 935.6 million dollars with higher sales from its China development projects, and higher fee income from CapitaMall Trust, it said.
For the first half to June, net profit rose 430.3 percent to 1.52 billion dollars, with revenues up 9.9 percent at 1.57 billion dollars.
'Our business units and the different geographies have performed exceptionally well in first half 2007,' president and CEO Liew Mun Leong said in a statement.
'Going forward, the group's prospects will be underpinned by our expanding overseas geographic footprint, even as we seek opportunities in Singapore's firm property market,' he said.
CapitaLand said it has over five million square feet of landbank for residential development here, along with 4.6 million square feet of commercial space, and 3.7 million square feet overseas, which it will constantly reconstitute to meet growing demands.
Macquarie Equities Reserach said it has upgraded its rating on CapitaLand to 'outperform' from 'neutral' while at the same time it lifted its target price to 8.50 Singapore dollars a piece from 8.30 previously, in the wake of the results.
'Group second quarter results were better than expected and core earnings are likely to grow at a compounded annual growth rate of 12 percent per annum over the next three years,' Macquarie said in a note to clients.
For the whole of 2007, Macquarie expects CapitaLand to post net profit of 1.88 billion Singapore dollars, up from 1.02 billion dollars last year. The 2007 estimate includes the revaluation gains booked by CapitaLand as of end-June.
'We reinstate CapitaLand as our top pick in the property sector, with a potential return of at least 17 percent. Given the strong asset markets, we anticipate 2008 revised net asset value to be 7-10 percent higher,' it said.
Kim Eng Securities analyst Wilson Liew said he is looking to upgrade his estimates following the second quarter results.
'Definitely there will be upgrades,' Liew said, noting that the first half earnings of CapitaLand have already surpassed full year 2007 earnings estimates by analysts.
According to Thomson's survey of 17 analysts, the 2007 consensus net profit estimate for CapitaLand is 994.64 million dollars.
Liew said CapitaLand's earnings should continue to benefit from revaluation gains going forward.
Such gains may be realized if the group decides to sell some of its office buildings.
Some of the buildings CapitaLand may look to sell include One George St, Caltex House and Hitachi Tower which are held by joint ventures. CapitaLand holds 50 percent stakes each in One George St and Hitachi Tower, and a 55 percent stake in Caltex House.
In March, CapitaLand sold Temasek Tower for 1.04 billion dollars, realizing an exceptional gain of 427 million dollars.
'We have to agree (first) with out joint venture partners,' CapitaLand chief investment office Kee Teck Koon said when asked if CapitaLand is looking to sell other office buildings.
Proceeds from the divestments will be re-invested by CapitaLand into new projects such as the mixed-used office, retail and residential complex it could develop on Beach Road near the historic Raffles Hotel if it wins the bidding for the 34,959 square meter site.
CapitaLand is bidding against several group including Cheung Kong Holddings and partner Keppel Land; Overseas Union Enterprise; City Developments and partners Isithmar and Elad Properties; and Pontiac Land.
(1 US dollar = 1.51 Singapore dollars)
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