Look beyond CapitaLand's FY2020 headline figures: analysts

OCBC Investment Research and RHB gave a 'buy' recommendation for CapitaLand.

CapitaLand Limited has reported a $1.57b net loss for FY 2020, due mainly to the revaluation of investment properties and impairments of projects and equity investments.

Operating profit after tax and minority interests (PATMI) for FY2020 fell 27.2% YoY to $769.9m. Revenue for the same period rose 4.8% YoY to $6.5b.

Despite jarring headline figures, analysts noted to look beyond this and into the recovery of the group.

According to RHB analyst Vijay Natarajan, the management highlighted that the revaluations or impairments were focused on a few of its key assets. Five retail assets accounted for slightly more than half of revaluation losses, and three assets accounted for about 80% of impairments.

“CapitaLand continues to pivot its assets towards new economy sectors and growing fund management business provides earnings resilience and a platform for recycling capital,” Natarajan said.

RHB expects a 27% jump in net profits in FY2021, driven by the absence of rent rebates and better performance from its lodging and retail portfolio.

It has maintained its “buy” recommendation for CapitaLand with a target price of $3.75.

Meanwhile, OCBC Investment Research (OIR) noted that CapitaLand’s competitive advantage is its significant asset base and extensive market network, which has been further boosted following the completion of the Ascendas-Singbridge merger.

CapitaLand has posted a dividend per share (DPS) of 9 Singapore cents per share in FY2020, a 25% decline from the previous year.

The OIR research team believes that the lower dividends was a result of the management electing to be more prudent given the ongoing macroeconomic uncertainties, whilst this could also be a strategic move to preserve liquidity to capitalise on future growth opportunities.

“Although the COVID-19 pandemic has impacted CapitaLand’s operations, we believe its strong balance sheet and diversified portfolio puts it in a better position to drive a recovery ahead, whilst capital recycling activities are also expected to resume in a more meaningful way,” the team said.

OIR has also given CapitaLand a “buy” recommendation with a fair value of $3.79.

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