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CapitaLand doubles profit, to be more aggressive in Singapore residential market

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CapitaLand reported a 97% rise in second-quarter net profit.   © Reuters

SINGAPORE (Nikkei Markets) -- CapitaLand, Southeast Asia's largest developer, plans to be more aggressive in vying for residential land in Singapore as the city-state's property market revives, its group chief executive officer said on Aug. 3.

Lim Ming Yan also said the company would continue to pump more capital into the Chinese market, although assets in China and Hong Kong would not account for more than 60% of the balance sheet.

Otherwise, the "concentration risk and the profile of the company would be slightly different," he said at a briefing following the company's results.

Earlier Thursday, CapitaLand, whose biggest shareholder is Singapore government investment firm Temasek Holdings, reported a 97% rise in second-quarter net profit as it booked higher revaluation gains in Singapore and China and profited from the sale of an office building in Shanghai as well as 18 rental housing properties in Japan.

The developer earned 579.3 million Singapore dollars ($425.8 million) in the three months ended June compared to S$294.0 million in the same period of 2016.

Group revenue for the quarter fell 12.3% to S$992.4 million, largely due to lower contribution from development projects in Singapore, while operating profit after tax and minority interest increased 20.5% to S$206.8 million.

The rise in operating profit was mainly due to higher contributions from development projects in China, and newly acquired properties in Japan and the U.S.

CapitaLand, which once focused on Singapore, has been expanding in China where it now owns or manages over 190 properties comprising mixed developments, shopping malls, serviced residences, offices and homes. The figure includes yet-to-be completed properties.

China and Hong Kong currently account for 43% of total assets, and Lim said he would be comfortable with a ratio around 50%.

Singapore accounts for another 35% of total assets while the rest is spread across geographies such as Vietnam, Japan and other parts of Asia, Europe and North America.

Lim said CapitaLand remained optimistic about Singapore's potential and was engaged in several large projects, including an upcoming retail cum lifestyle complex at Changi Airport and a new office development in the central business district.

He added that CapitaLand would have to be a bit more aggressive in bidding for residential sites auctioned by the government given the strong interest shown by other developers, although he stressed the company would remain disciplined with its bids.

While home sales have risen and prices have stabilised in the city-state, Lim said the increased demand was partly due to the huge amount of funds held by global property investors.

"This is very much something that is liquidity driven," he said, noting that authorities in Hong Kong, Australia and the U.K. have taken steps to rein in prices.

Singapore's residential property market has shown signs of bottoming in recent months amid a jump in apartment sales and as developers bid aggressively at government land auctions.

According to the Urban Redevelopment Authority, developers sold 6,039 units in the first six months of this year compared with 3,675 units in the same period last year.

URA also said prices of private residential property fell 0.1% in the second quarter from the first three months of 2017, the smallest decline since the government initiated cooling measures about three-and-a-half years ago.

CapitaLand did not provide an outlook, although Lim cited the "positive momentum" arising from its growing malls and serviced residences business.

--Kevin Lim

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