Capitaland Limited: Boosted by revaluations and portfolio gains

Below; maintain Neutral. FY10 core net profit of S$351m was only 75% of our forecast, possibly below consensus as well. Results were again littered with revaluation and portfolio gains. Stripping these out, we attribute the earnings miss to lower-than-expected revenue from CMA and its China SBU. Management plans to deploy excess capital to its core markets in 2011, with the emphasis likely on China and Singapore. With an estimated 40% of its GAV already coming from listed vehicles, we believe the spotlight may now shift to execution in the residential segment, where policy threats remain a drag. We keep our FY11-12 EPS estimates and introduce FY13 estimates. Maintain Neutral on valuations, with an unchanged target price of S$4.04, now pegged at a wider 15% discount (5% previously) to RNAV (S$4.75) on heightened policy concerns in its core markets. We may revisit the stock on wider valuation discounts to its RNAV and the broader market.

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