CapitaLand profit up 5.8% despite drop in home sales

Property developer CapitaLand is exploring opportunities to expand in Indonesia, Vietnam and Malaysia as headwinds are expected to affect the Singapore property market, reported Today Online.

Nonetheless, China and Singapore will remain the core markets of the company and it will continue to look for the right opportunities to build on its presence in the two countries, said Lim Ming Yan, group chief executive of CapitaLand.

The group plans to continue sourcing for well-located sites in Singapore to build its residential properties.

We feel that land price is still at a level where it does not make risk return trade-off sensible for us. Of course, we want to replenish our land bank. We have about 1,300 unsold units, but we want to do it in a way that will make a profit for our shareholders, explained CapitaLand Singapore chief executive Wen Khai Meng.

In its financial statement for the second quarter, CapitaLand revealed that the number of residential units sold in Singapore between April and June dropped 77 percent from 161 units in Q2 2014 to 37 in Q2 2015.

Despite the drop in home sales, CapitaLand saw its Q2 net profit increase 5.8 percent from the previous year to $464 million, primarily due to fair-value gains from two properties in China.

Higher contribution from development projects in China also helped the groups revenue to climb 17.8 percent year-on-year to $1.03 billion in the period.

China and Singapore accounted for 79.6 percent of CapitaLands total revenue last quarter, an increase from last years 72.9 percent.

Lim noted that while the work of the team within the core markets does not stop here, CapitaLand is also committed to strengthening its presence in Indonesia, Malaysia and Vietnam over the next two to three years.

We like what we see in Vietnam, in terms of the very young, dynamic population and in terms of policies that are increasingly more open to foreign investments and also increasingly pro-business One more trend we see in Vietnam is urbanisation, which is taking place in both Ho Chi Minh City and Hanoi. So, these are all the right ingredients for the real estate market to do well, said Lim.

Vietnam recently eased its rules on foreign property ownership, while Indonesia also plans to do the same.

Meanwhile, CapitaLand is still hopeful of its Danga Bay project in Malaysias Iskandar special economic zone. Wen noted that the company has received all the required approvals and is just waiting for infrastructure to be put in place before they start development there.

(The infrastructure) will probably take about two years to complete We still think that notwithstanding the immediate supply glut challenges, the fact that we entered at a reasonably low land cost We are confident that this project will still be a viable one, added Wen.

Romesh Navaratnarajah, Singapore Editor at PropertyGuru, edited this story. To contact him about this or other stories email romesh@propertyguru.com.sg

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