Where next for CapitaLand in 2020?
Most analysts remain optimistic about the CapitaLand stock, citing a potential recovery in residential sales in the second half of the year.
- CapitaLand shares are down 27% year-to-date
- Analysts see 36% share price upside in the next 12 months
- UOB lowered 2020 full-year net profit forecast by 73%
- Residential sales to recover in the second half of 2020
CapitaLand share price: What’s the latest?
The CapitaLand (SGX: C31) stock continues to face downside pressure, with shares currently down 27% year-to-date.
Since our last update, share price has fallen another 3%, as market volatility remain lifted (the Volatility Index is currently trading nearly two times above its three-year simple moving average).
As at 11:30 SGT on Thursday 10 September 2020, the Singapore property developer is trading at S$2.73 a share on the IG platform.
IG’s client analysis shows that ‘buys’ form half of all trades on the CapitaLand counter this week.
CapitaLand share price prediction: Where next?
The CapitaLand stock currently has an average rating of ‘buy’, based on a Bloomberg survey of 14 brokers.
The analysts have also given the stock an average 12-month target share price of S$3.71. This represents an upside of 35.9% from the last traded price.
The most bullish sentiments were from Macquarie and Morgan Stanley, who earlier this month rated the stock ‘outperform’ (price target: S$3.95) and ‘overweight’ (price target: S$3.60) respectively.
The most bearish case came from UOB’s Adrian Loh, who gave CapitaLand a ‘hold’ recommendation and target price of S$3 per share.
He cited the group’s poor first half 2020 financial results in his analysis, stating that while CapitaLand’s first half revenue only declined 6% year-on-year, profit after tax and minority interests fell a much higher 89% to S$97 million.
He also noted that while the company ‘has clearly been putting more efforts on pushing out its e-commerce platform’ after seeing Covid-19’s damaging impact, its business outlook still ‘remains mixed’.
That’s because of ‘a potential prolonged spell in the doldrums for its lodging portfolio’, in which CapitaLand is ‘leveraged to long-stay customers via its lyf, Ascott and Citadines brands’.
As such, UOB lowered its net profit (after tax) forecasts for CapitaLand by 73% to S$374 million for the 2020 financial year, and 38% to S$919 million for the 2021 financial year.
Share price is also expected to ‘perform in-line with STI at best in the next six months’, Loh concluded.
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What’s the CapitaLand sales forecast?
In terms of sales outlook, Bloomberg Intelligence analysts Patrick Wong and Michael Tam wrote that CapitaLand's property sales in China 'could gradually recover from Covid-19 and remain its dominant revenue contributor this year'.
They noted that the developer had S$134.7 billion in real estate assets under management as of end-first half 2020, with China comprising 42%.
CapitaLand’s China division, they wrote, has also already secured 18.2 billion yuan in sales from about 7,800 housing units in China, with 70% of the related revenue expected to be booked in the second half of 2020. An additional 4,440 apartments are also available for sale in the second half.
The analysts added that CapitaLand's Singapore home sales could also be higher in the second half of 2020 (against just S$60 million in the first half), as sales pipeline remains strong – with over 900 unsold units from One Pearl Bank and Sengkang Grand Residences as of mid-August 2020.
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