Key Takeaways Capitaland Financial Results 2020

Key Takeaways Capitaland Financial Results 2020 picture

As investors who are learning how and where to invest money in Singapore, it is important to listen to the financial performance of firms in the fiscal year. Such presentations give you a clue on the latest developments and can often be found on the company’s website. However, it can be difficult to sit down for hours straight to listen and distill what management is saying. This is a short overview of what transpired during Capitaland’s presentation for financial year 2020.

Covid-19 and its impact on Capitaland

2020 is an interesting year for Capitaland, due in part to the challenging business environment that they have been operating in for the past months. Even though Capitaland is a stable company with relatively well diversified business segment and portfolio, the diversification did not fully offset the widespread business disruption that Covid-19 caused. Covid-19 started as the Wuhan Virus in China and eventually became a global pandemic. As it is a global health issue, global travel and companies that provide hospitality services such as Ascott Residential Trust was naturally affected. However, Covid has a far wider impact than SARS.

Covid-19 is difficult to exterminate the virus due to how contagious it is, resulting in extreme measures having to be put in place in an attempt to contain the virus. These extreme measures include country wide lock downs as well as the mandatory wearing of face mask. Such measures reduce foot traffic in previously popular attractions, causing businesses that rely on foot traffic to suffer a hit. As countries continue to experience waves of reinfections, it remains very uncertain as to whether there will ever be a day where businesses can operate in the Pre-Covid ways.

Y-o-Y Performance

Capitaland released its first half results for this current fiscal year. Revenue was down 4.9% year on year but operating PATMI was down 89% to 96 million. Those who have read our update on the 2019 financial performance of Capitaland will wonder if that means most of the positive effects of acquiring Ascendas Singbridge has been negated in 2020 due to Covid-19.

Asset Diversification of Capitaland

While the increase in PATMI or EBIT was largely negated by the impact of Covid-19, one should not just look at the absolute amount of earnings but also at the composition of the earnings. Post the Ascendas Singbridge Acquistion, Capitaland’s earnings were spread out more evenly across old and new business segments. Some of these segments are also new, as Capitaland did not have any previous expertise in business parks or in India. 

Apart from the change in earnings composition due to increased diversification, the acquisition of Ascendas Singbridge also brought about an increased ability to do more asset recycling. This is because the acquisition also means that there are more Reits and Business Trust under the Capitaland Brand umbrella that allows for better utilisation of capital.

Composition of PATMI 2020
If we look at the main contributors to the fall in PATMI, it is clear that most of it is a result of inability to realise fair value gains and the lack of any revaluation gains. This reduces the anxiety that many feel given the sharp 89% drop in PATMI.
While we expect Capitaland to continue to be faced with tough operating environment, what we can be sure is that the Capitaland that we have in 2020 is more resilient than it used to be before the Ascendas Singbridge Acquisition.

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