Friday, July 31, 2009

CapitaLand reports loss, issues $1.1b in bonds

PROPERTY giant CapitaLand yesterday posted its first quarterly loss in six years and announced plans to raise $1.1 billion by issuing convertible bonds.

The money raised will be used primarily to refinance existing debts, said South-east Asia's largest developer. Any balance left over will go towards new investments and working capital. The firm announced a $156.9 million loss for the second quarter yesterday morning, its first red ink since the last quarter of 2003.

This was down from a net profit of $515.2 million in the same quarter last year. It was due to revaluations and impairment provisions for its office assets in Singapore, property in Australia and the former Char Yong Gardens estate here, CapitaLand said.

At 10pm, the developer issued a statement saying it plans to issue $1.1 billion in convertible bonds, which can be converted into new ordinary shares. The issue will be placed with institutional and sophisticated investors.

The latest bonds bear a coupon rate of 2.875 per cent per annum, lower than the previous two issues. This is not surprising given the low interest rate environment, which may be behind CapitaLand's decision to issue bonds now. Their conversion price is $4.79, a 20 per cent premium over yesterday's closing price.

This bond issue is CapitaLand's fifth and its third billion-dollar one in three years, following a record $1.3 billion bond issue in February last year and another $1 billion bond issue in May 2007. In February this year, CapitaLand also launched a one-for-two rights issue to raise $1.84 billion, which the firm said would allow it to pursue acquisitions and other investment opportunities. Yesterday, the developer said it had a cash position of $4.2 billion as at the end of last month and maintained a net debt-to-equity ratio of 0.43.

But CapitaLand has had to meet cash calls from some businesses. On Monday, it said it would inject A$281.6 million (S$333 million) into its Australian unit Australand by taking up all its allotted shares in Australand's latest rights issue.

Australand, which posted a net loss of A$268.8 million in the first half of the year, said the money would help strengthen its balance sheet as it goes into a challenging second half. For the Singapore property market, however, things are looking up, said CapitaLand chief executive Liew Mun Leong yesterday morning.

He believes the exuberance in the market could send prices up about 5 per cent to 10per cent by the year end and into next year.

Mr Liew told a results briefing that demand for private homes is in a healthy state at the moment and it does not appear there is a bubble forming.

'If people are buying homes only as investment tools, then it's a different story,' added Mr Liew, who pointed to demand from newly-weds needing homes and affordability as drivers of the recent buying activity.

He added that CapitaLand has been waiting on the sidelines while other developers launched projects to capitalise on the renewed buying interest.

The firm is waiting 'to pull the trigger at the right time', said Mr Liew. It will launch projects at the former Gillman Heights in Alexandra Road and the former Char Yong Gardens in Cairnhill for sale by the end of this year.

CapitaLand has seen strong buyer interest at the relaunch of The Wharf Residence, where 94 per cent of the 173 apartments have been sold, he added.

While the immediate future looks rosier than it has been for months, the second quarter was painful for CapitaLand.

Apart from revaluation and impairment costs, revenue also declined: It was down 27.9 per cent to $591.1 million for the three months to June30. Excluding revaluation and impairment costs, profit during the quarter was $124 million.

China continued to be a growth area, with healthy sales from new launches in Beijing, Chengdu and Foshan. In Vietnam, the group sold more residential units at The Vista in Ho Chi Minh City. Loss per share for the second quarter was 3.7 cents, down from earnings per share of 15.1 cents a year ago, while net asset value stood at $2.86, down from $3.78 as of Dec 31.

For the first half, the firm lost $114.1 million compared with a net profit of $762.7 million last year. Revenue dropped 25.7 per cent to $1.08 billion.

CapitaLand's stock, which has jumped about 55 per cent this year, closed 1 cent down at $3.99 yesterday.

Source: Straits Times, 31 July 2009

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