Published October 29, 2009

Trump card for CapitaLand in CMA

By KALPANA RASHIWALA

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CAPITALAND'S third-quarter report card released this week was a marked improvement from its showing in the first two quarters of this year. Still, the $167.2 million net profit that it achieved for the first nine months of this year is a far cry from the $1.18 billion in the same period last year.

However, plans to float a stake in its integrated shopping centre business under CapitaMalls Asia (CMA) by the year-end could add handsomely to CapitaLand's fourth-quarter and full-year bottom lines.

CMA has a net asset value of $5.3 billion but assuming that its assets are valued at 1.5 to two times book value during the initial public offering (IPO), the total market worth of CMA would be about $8-10 billion. If CapitaLand floats a stake of 30 per cent, the pre-tax profit that it stands to book from the IPO could be in the order of $800 million to $1.4 billion.

CapitaLand's management has indicated that the board may consider recommending a special dividend to shareholders following CMA's flotation.

UBS Investment Research, in a recent paper, estimates that assuming an $8 billion valuation for CMA and a 30 per cent free float, the special dividend would work out to 27 cents per CapitaLand share if it decides to pay out 50 per cent of the IPO proceeds, and 54 cents per share assuming a 100 per cent payout.

On a $10 billion valuation for CMA and a 40 per cent free float, the payout could range from 45-90 cents per share.

Since CapitaLand announced its plans earlier this month to float CMA, its share price rallied about 21.5 per cent to a high of $4.46 on Monday, although it has given up much of the gain, ending at $4.15 yesterday.

By UBS's calculations, an $8-10 billion valuation for CMA will add 61 cents to $1.06 to its revalued net asset value (RNAV) per share for CapitaLand, which it estimates at $4.30 based on CMA's $5.3 billion book value. By launching an IPO, a higher value will be placed on the CMA business than if it remained as an unlisted part of CapitaLand. Or as CapitaLand's management has put it, its plans to float CMA will 'unlock shareholder value by crystallising the value of CapitaLand Group's integrated shopping mall business'.

CapitaLand shareholders stand to gain by approving the group's plans to float CMA. No doubt it will also be good for members of its management, whose pay packets should benefit from a stronger bottom line. And not to forget JP Morgan, the sole financial adviser.

However, some CapitaLand shareholders may also hold stakes in CapitaMall Trust (CMT) and CapitaRetail China Trust (CRCT), which many analysts reckon may fare less favourably after CMA is listed.

CMT may face short-term price weakness from asset reallocation to CMA, as UBS says. The process has already begun. CMT's unit price has slipped from $1.82 before the announcement on CMA to yesterday's closing price of $1.60.

CMA, with a portfolio of 86 malls in China, Singapore, Malaysia, Japan and India, may be more appealing to investors than CMT - which has a presence only in Singapore. CMA's free float market cap could rival CMT's. Still, CMA could find it worthwhile to sell assets, such as its 50 per cent stake in ION Orchard, to CMT given the tax transparency that CMT, as a real estate investment trust (Reit), enjoys in Singapore. In other words, if ION remains in CMA, the income from the mall will be taxed at the corporate tax rate (at the vehicle or CMA level). If however, ION is sold to CMT, the mall's income will be exempt from payment of corporate tax at the Reit/vehicle level, under the tax flow-through allowed for Singapore Reits.

So CMA will retain an incentive (from the viewpoint of this tax saving at least) to develop, warehouse and sell assets to CMT - pretty much the arrangement that now exists between CapitaLand and CMT.

However, this may not be the case for CRCT. That's because CRCT does not enjoy tax transparency since its income is derived from the ownership of malls in China, where it has to pay taxes on the income before it can bring it to Singapore.

This being the case, there could be less incentive for CMA to offload its China malls in future to CRCT. In fact, it may diminish or extinguish the raison d'etre of CRCT.

When CapitaLand floated CRCT in December 2006, it had planned to grow its initial $690 million portfolio of seven malls in China to $3 billion by end-2009. So far, it hasn't been very successful. Today, its portfolio comprises eight malls worth $1.2 billion.

Who knows, CapitaLand could eventually privatise CRCT and let its China malls business sit entirely in CMA. This could provide a nice exit for CRCT shareholders.

These are some questions that CapitaLand shareholders who also own units in CMT and CRCT may ponder as they vote tomorrow on CapitaLand's plans to float CMA.

Published October 29, 2009

Maxis goes for broke with huge offering

M'sia's biggest-ever IPO may raise up to RM11.6b when shares list in Nov

By S JAYASANKARAN
IN KUALA LUMPUR

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MALAYSIAN telecommunications firm Maxis is offering 2.25 billion shares to institutional and retail investors in a bid that could conceivably raise RM11.6 billion (S$4.7 billion) when the firm lists its shares on the Malaysian bourse on Nov 19.

Mr Das: Market is mature but not saturated. Maxis's growth will come from data, broadband services

The details were revealed after the firm released its prospectus in a glittering, multi-media presentation in Kuala Lumpur yesterday. The initial public offer from Maxis, which was privatised in 2007, is the largest in Malaysian corporate history and the largest in South-east Asia. Incidentally, the largest float on the Kuala Lumpur stock exchange previously was also Maxis (RM3.2 billion) when it was first listed in 2003.

The precise amount that the IPO will raise isn't clear as there is a book building exercise now underway at indicative prices ranging from RM4.80 to RM5.50. However, Nazir Razak, the chief executive of CIMB, the lead investment bank, said yesterday that four institutions had locked-in more than 20 per cent of the firm at RM5.20 a share.

The four: the Employees Provident Fund, the state-owned Pension Trust, Permodalan Nasional Berhad, and Fidelity. Mr Nazir indicated that retail investors would get their shares at a 5 per cent discount to the institutional investors.

The run-up to the IPO has been relatively seamless and one of the quickest in Malaysian corporate history. One reason: it came about after Prime Minister Najib Razak himself asked for it on the grounds that it would add breadth and liquidity to the Malaysian bourse.

Analysts agree, a sentiment that was echoed by Mr Nazir yesterday. Indeed, the float is likely to attract keen interest because of the stock's potential yield. The prospectus promised that the firm would return at least 75 per cent of net profit to shareholders or some 25 sen a share. But according to bankers, potential institutional investors have been told that the firm would upsize that to 50 sen a share.

At RM5.20 a share that translates to a dividend yield of 10 per cent, one of the highest in the business. 'They need to drum up interest in their IPO but I concede they could easily do it given their cash flows,' one foreign analyst told BT. 'But can they sustain it, post listing?'

It's debatable. Maxis contains the Malaysian operations of Maxis Communications (MCB) which has operations in the fast growing markets of Indonesia and India. Meanwhile, analysts argue that the Malaysian telecommunications market is saturated.

'It's mature but it's not saturated,' Maxis chief executive Sandip Das told the press yesterday. He insisted that the new growth would come from Malaysia's demographics (a relatively young population), data and broadband services.

For the year to December 2008, the firm made a net profit of RM2.4 billion although this included its international operations so it's not really an indicative figure. However, analysts said that growth in 2009 should be around 12 per cent.

Maxis will be owned 70 per cent by MCB after listing. MCB itself is 75 per cent owned by the family and allies of Malaysian billionaire T Ananda Krishnan while Saudi Telecom owns the remainder.

The low-profile tycoon, who was not present at the ceremony yesterday, took Maxis private in 2007 for US$4.7 billion and sold the 25 per cent to the Saudi firm two months later for US$3 billion.

Published October 29, 2009

COMMENTARY
Results bring cheer, but caution is in order

Three items mask flat net interest income for the third quarter

By CONRAD TAN
REPORTER
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IS THE worst over for Singapore banks? OCBC Bank's forecast-beating third-quarter results yesterday certainly raised hopes that banks here have turned the corner and are poised for a robust recovery.

But a closer look at the main drivers of its earnings suggests that caution is still in order.

OCBC's net profit of $450 million beat analysts' expectations by an unusually wide margin, even though the group suffered a $154 million hit - after tax and minority interests - to its bottom line from the redemption of GreatLink Choice structured investment products by insurance subsidiary Great Eastern Holdings.

Analysts surveyed by Reuters had forecast an average of $278 million in Q3 net profit for OCBC, while those polled by Bloomberg had expected $244 million.

Its outperformance appears to have been mainly due to two factors: lower provisions for bad loans and other assets than analysts had feared; and higher-than-expected trading and investment gains. On closer examination, both factors are a direct consequence of the recent recovery in financial markets.

Overall, OCBC's results provided some much-needed cheer to investors watching the Q3 earnings season.

The first was due mostly to a sharp fall in allowances for assets other than loans, mainly investment securities, to just $4 million for the third quarter, from $57 million for the second quarter, OCBC said. As a result, net allowances for loans and other assets fell by half to $52 million, from $104 million for Q2.

The second factor - higher-than-expected income from trading and gains from investment activities - is particularly interesting.

Just three items - profit from life assurance, net trading income and gains from investment securities - accounted for 86 per cent of OCBC's non-interest income for the third quarter, compared to 42 per cent in the previous quarter and 39 per cent a year earlier. And even if its non-interest income had not been reduced by $213 million due to the GreatLink Choice redemption, the same three items would have made up 56 per cent of the group's total non-interest income for the third quarter - still much higher than in the earlier periods.

The surge in profit from life assurance - to $209 million for Q3, from $125 million for Q2 - was due mainly to an increase in profit from Great Eastern's non-participating fund, which was in turn due to the recovery of the equity and bond markets.

Put simply, OCBC's latest results appear to have received a large boost from the recent rebound in equity and bond markets that both reduced its charges for asset impairment and swelled its income.

There is nothing wrong with that - the bank and its subsidiary, Great Eastern, deserve credit for taking advantage of the recovery in financial markets. But it does mean that a big chunk of OCBC's third-quarter income - the three non-interest income items made up 31 per cent of the group's total income for the period - came from sources that are inherently volatile and beyond its immediate control.

A look at the performance of its core lending business also suggests that the lending environment for Singapore banks remains difficult. Net interest income, which accounted for 59 per cent of OCBC's total income for the first nine months of the year, fell 3 per cent to $689 million for Q3, compared to $710 million for the previous quarter, as both its net interest margin and loan book shrank.

The bank's net interest margin - a measure of how profitable its lending activities are - is likely to remain under pressure from low interest rates and renewed competition from its rivals as consumer and business sentiment here improves. Encouragingly, however, the bank said that its average loan spreads were higher for the third quarter, compared to both the previous quarter and a year earlier.

The proportion of non-performing loans (NPLs) held by the bank also fell, to 1.8 per cent at the end of September, from 2.1 per cent at end-June - a pleasant surprise.

That is highly encouraging - but it is too soon to conclude that NPLs reached their peak in the second quarter. Whether that is indeed the case depends heavily on the strength of the economic recovery in the bank's core markets in Singapore and the rest of Asean, which in turn hinges on the recovery of major economies elsewhere.

Overall, OCBC's results provided much-needed cheer to investors watching the third-quarter earnings season in Singapore. But it will need another quarter or two of strong results - backed by improvements in its core lending business - to convince investors that it is well and truly back on the earnings growth path.

Published October 29, 2009

Funds sweat over new CPFIS criteria

Some 40% risk being struck off; top quartile ranking is sticking point

By GENEVIEVE CUA

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(SINGAPORE) More than 40 per cent of the unit trusts and investment-linked insurance funds (ILPs) in the CPF Investment Scheme (CPFIS) are at risk of being struck off the scheme if they do not fully comply with CPF's admission criteria by January 2011.

By far the most contentious among the criteria is the one requiring the funds to be ranked among the top quartile (the highest 25 per cent) of their global peer group.

This is the sticking point, as fund managers can and have stepped in to ensure compliance with the other criteria. For instance, some managers subsidise the expenses of smaller funds to ensure that their expense ratios do not exceed CPF's caps.

Top quartile is defined along quantitative and qualitative factors, where a fund registered for Singapore sale will be scored and ranked alongside its global peer based on Morningstar's database. Morningstar is the investment consultant for the CPFIS.

Among ILPs, CPF savings' share of a fund's assets could be as high as 70 per cent. Among unit trusts, the share ranges between 30 and 50 per cent. Hence, for some funds, failure to remain in the scheme would have major implications.

As at end-June, a total of $22.9 billion of CPF savings (Ordinary and Special Accounts) is invested in insurance policies and $6.3 billion in unit trusts.

BT understands that numerous funds are scheduled for re-evaluation by Morningstar over the next few months. Some have already made it to the approved list. But those are understood to be a minority so far as most funds are awaiting their turn in a long queue, or are waiting to be told the results.

Based on a list released earlier this year, a total of 147 funds need to be re-evaluated. There are a total of 346 unit trusts and ILPs in the CPFIS menu. The cost of re-evaluation is $5,900 per fund, which may or may not be charged to the fund.

Funds which fail to meet the criteria must cease to take in fresh CPF savings by January 2011. Managers must offer investors three options - to hold, redeem or switch for free to another fund that is fully compliant with the CPF rules. The free switch period is understood to be six months.

An alternative for funds that fail to meet the criteria is that managers could opt to have the fund sub-advised by a third-party manager which must have passed CPF's screen.

BT understands, however, that the idea of external management is unattractive to most managers. In any case, it may not be feasible for larger fund houses such as Fidelity, where the size of its CPF asset base is tiny relative to its offshore investor base.

A unit trust that contemplates a third-party manager may have to call for an extraordinary general meeting to vote on the matter.

The chief executive of a fund management firm said: 'The exercise is very subjective. I don't see how there can be a clear and objective way to measure top quartile ranking.'

He says his firm is not inclined to opt for third-party management, should any of the firm's funds fail to pass muster. 'What makes (the CPF and Morningstar) think a sub-adviser will do a better job?'

However, a source at another firm said: 'If we have to use an external manager, of course we will do it. . . Because if a fund is taken out of CPFIS, what happens to existing investors? They can't do top-ups and it becomes very confusing.'

The other three criteria are that the funds' total expense ratio must not exceed the median expense ratio of CPFIS funds in their respective risk class; their sales charge must not exceed 3 per cent; and they must have a three-year track record.

The admission criteria have been in place since 2006, but they have so far been enforced in stages to enable funds to make the transition.

Some of the largest and most established funds are slated for re-evaluation. These include Prudential's Prulink Singapore Managed Fund, which has more than $2.5 billion in assets as at end-June; and AIG's Acorns of Asia Fund with over $1.2 billion in total assets.

Prudential Assurance's chief marketing officer Tomas Urbanec said the insurer has 19 funds in the CPFIS scheme. Five are fully compliant and 14 await re-evaluation.

'As this is an industry-wide exercise which is ongoing, we would prefer to let CPF announce the final approved list when the exercise is completed.'

Morningstar's quantitative criteria for product inclusion in the CPFIS include performance and style consistency, management tenure - that is, funds with minimum manager changes are preferred; and expenses.

The qualitative analysis looks into a manager's history of success, organisational strength, investment process consistency, and asset size and growth. On the latter point, Morningstar looks into how performance has changed as assets grow.

Published October 29, 2009

NPLs shrink as OCBC beats bleak forecasts

Q3 profit hits $450m outstripping $278m forecast; banks may be turning corner

By EMILYN YAP

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(SINGAPORE) OCBC Bank yesterday trumped expectations to post a third-quarter net profit of $450 million - up 12 per cent from a year ago. The proportion of non- performing loans (NPLs) in the bank's books also fell, providing potential signs of an economy on the mend.

'I hope NPLs have peaked,' OCBC chief executive David Conner said in a briefing. 'We're probably going to see a gradual recovery continue, in which case our NPL ratio and NPL should each trend down slowly.'

Analysts had expected OCBC to rake in a net profit of just $278 million, going by the average of six forecasts from a Reuters poll. The bank's result far exceeded this estimate by 62 per cent.

Earnings were boosted by a sharp fall in provisions, together with strong gains in insurance, trading and investment incomes. OCBC set aside $52 million as allowances for loans and impairment of other assets in Q3. This is 50 per cent less than the $104 million in the preceding quarter, and 67 per cent less than the $156 million a year ago.

Related articles: Click here for OCBC's news release and financial statements Presentation slides

Several analysts had expected these charges to remain high. The decrease was largely due to lower allowances for other assets - mainly investment securities - as financial markets recovered.

Total NPLs in Q3 stood at $1.43 billion, shrinking 12 per cent from $1.63 billion in the preceding quarter. The NPL ratio also dropped to 1.8 per cent from 2.1 per cent over the same period. NPLs declined because of sharply lower new NPL inflows, higher recoveries and repayments, as well as write-offs.

Mr Conner warned that some bad loans may still emerge, particularly from large to mid-sized corporate portfolios. But 'assuming a reasonable, gradual recovery, we should see NPLs trend down'.

OCBC also benefited from large jumps in insurance, trading and investment incomes in Q3. Life assurance profits rose 44 per cent year-on-year, net trading income grew 59 per cent, and the sale of investment securities brought in a gain.

But these improvements were offset by the impact of a loss of $213 million ($154 million after tax and minority interests) arising from the redemption offer of GreatLink Choice policies by subsidiary Great Eastern Holdings.

As a result, OCBC's non-interest income fell 15 per cent from a year ago to $392 million. Excluding this charge, its non-interest income would have risen 31 per cent to $605 million. OCBC's net interest income stayed relatively flat at $689 million in Q3. This reflected narrowing net interest margins as well as lower loan volumes.

OCBC's gross loans as at Sept 30 stood at $78.7 billion, falling 3 per cent from a year ago. This was due to repayments by corporate customers, reduced loans at overseas branches, and lower trade-related loans.

But the lending business could be improving. 'The bookings of new housing loans are way up,' Mr Conner said. 'We're also seeing a fairly robust pipeline on the corporate side, so we're anticipating the decline in loans to start to turn as early as this quarter.'

The bank said it approved 65 per cent more new private home loans in Q3 compared to the previous quarter. From the applications received, Mr Conner believes that the demand for housing is real and there is no need 'to be particularly concerned' about the property market.

For the first nine months, net profit was up one per cent at $1.46 billion. OCBC shares closed unchanged at $7.53 yesterday.

'There's a good chance that UOB and DBS could surprise as well,' CIMB-GK analyst Kenneth Ng said.

Published October 28, 2009

KL Metro eyes China, Vietnam for resort business

Group has already completed its 2nd water homes project

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(KUALA LUMPUR) Kuala Lumpur Metro Group (KL Metro) is eyeing China and Vietnam to expand its resort development business, said managing director Low Tak Fatt.

'We are still in negotiations with the local parties there. Once the project is firmed up, we will make an announcement,' he told a media conference here yesterday.

It is understood that if the negotiations were successful, it would be KL Metro's first venture outside Malaysia. At the press conference, Mr Low announced the completion of the company's second water homes project, the Legend International Water Homes in Port Dickson, Negeri Sembilan.

The first was the Legend Water Chalets. The resort will be managed by Legend Group of Hotels and Resorts.

Mr Low said a soft opening for the Legend International Water Homes was scheduled this Sunday and an official opening at mid-2010. 'Most of the buyers are from Hong Kong, UK, Singapore, United Arab Emirates and Macau. They are mostly private investors who buy the units and lease them back to us for a certain period,' he said.

He said the water home unit would offer a good investment with attractive capital appreciation potential as supply was limited.

Mr Low said the occupancy rate for the Legend International Water Homes was expected to grow from 50 per cent targeted for next year to 63 per cent in 2012. He said KL Metro Group was upbeat about the resort business, adding that the strong demand for water homes was seen in the high room rates charged by resorts such as Pangkor Laut and Avillion.

'Our philosophy is to develop more high-end resort homes in Malaysia as well as abroad as there is huge demand,' he said.

He said KL Metro also planned to develop its third project, Hibiscus Garden Chalets, which would feature single-storey landed resort homes. 'The project, targeted for completion in two years, will have 74 units with a GDV of RM45 million (S$18.6 million),' he said.

On the Hibiscus Water Homes in Teluk Kumbar, Penang, Mr Low said the project was expected to be launched in middle of next year. According to him, the group has filed for the copyright to use the Hibiscus, the national flower, as its development model to enable it to build more resorts in other states in the future.

On whether KL Metro would seek a listing to raise capital, Mr Low said: 'So far we do not have plans to list as we are a small-scale developer.'

On the impact of the imposition of 5 per cent real property gains tax effective on Jan 1 next year, Mr Low said: 'It is not going to have impact on our buyers as the amount is small compared with the previous 30-15 per cent.'

He said the Budget 2010's allocation of RM899 million to boost the tourism industry was good to market the country as a holiday destination. 'The tourist arrival trend in Malaysia is expected to grow next year as the country offers a diversified culture and experience,' he said. -- Bernama

Published October 28, 2009

Tenaga core earnings slide 18%

Results better than expected; govt to consider application for tariff hike in Jan

By S JAYASANKARAN
IN KUALA LUMPUR

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SHARES of national power utility Tenaga Nasional moved up slightly to RM8.50 after the power utility announced on Monday a 2009 core net profit - net profit stripped of extraordinary items - of RM2.1 billion (S$862 million), 3 per cent above consensus estimates.

Loosening grip: Tenaga's foreign shareholding has slid from a high of 29% in April 2007 to only 9.7% currently

Even so, the utility's core net profit slid 18 per cent year-on-year mainly due to decreased demand because of the recession and higher coal prices. Still, the company remains reasonably sound with free cash-flows of RM1.6 billion and gross cash balances of RM6 billion although it has always been in a net debt position: its total long term liabilities are a whopping RM31 billion.

What the company wants is a tariff hike which the government will consider in January. The utility, which is 70 per cent-owned by the government, can only raise, or drop, tariffs with government consent and it's been lobbying Kuala Lumpur for a raise after it cut tariffs by 3.7 per cent in March. But fuel prices have gone up and the government has yet to agree.

It could be one reason why foreign shareholders seem to have given up on the company. The firm's foreign shareholding has slid from a high of almost 29 per cent in April 2007 to only 9.7 per cent currently.

In many ways, Tenaga's dilemma mirrors the government's predicament: it wants to reduce the burden of rising subsidies in the power sector but fears a public backlash against rising costs at a time when the opposition is looking increasingly resurgent,

Currently, industrial and household users enjoy some of the cheapest rates in Asia courtesy of subsidised gas supplied to power producers by Petronas, Malaysia's national oil corporation.

Indeed, the oil firm loses billions annually through the subsidies which is why Kuala Lumpur has agreed, in principle, to commit to a gradual move towards market prices. In that sense, a tariff hike could be an important first step in that direction although analysts still think it unlikely given that the power firm isn't doing too badly.

Still, Kuala Lumpur seems to be preparing the ground for an eventual adjustment. Energy Minister Peter Chin has publicly said that consumers 'would have to be prepared' for higher tariffs going forward.

Petronas has also been lobbying for a move to market prices. At its peak, gas prices were at RM48 per million British Thermal Units (mmbtu). At that time, Tenaga was paying Petronas RM14.31/mmbtu, a subsidy of over 300 per cent. Currently, the utility's subsidy has eased to a still-sizeable 50 per cent.

A tariff hike would benefit the firm: it flows directly on to its bottom line. Even so, some analysts think the power firm is overrated from a valuation standpoint. Analysts at Arab-Malaysian Bank estimate Tenaga's 'fair' value at around RM8.30.

Published October 28, 2009

CapitaLand Q3 profit drops 32.9% to $281.3m

Comparative quarter last year benefited from substantial divestment gains

By KALPANA RASHIWALA

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PROPERTY giant CapitaLand has posted a 32.9 per cent year-on-year drop in net earnings to $281.3 million for the third quarter ended Sept 30, 2009.

Vietnam project: CapitaLand is targeting an official launch for its Mulberry Lane project in Hanoi in early 2010

Earnings before interest and tax (Ebit) slipped 34.9 per cent to $450.6 million. The fall in profit was due to the Q3 2008 bottom line being boosted by Ebit gains of $441.6 million from the divestments of One George Street in Singapore, Capital Tower Beijing and the Raffles City properties in China.

CapitaLand said its Q3 2009 earnings were largely driven by strong profit recognition from its residential projects as well as a $52.8 million gain from selling its remaining stake in Hong Kong's Link Reit.

Related links: Click here for CapitaLand's news release Financial statements Presentation slides

The group achieved revenue of nearly $1.05 billion in Q3 2009, up 75.2 per cent from the same year-ago period.

The jump was due to higher revenue recognition for the group's development projects in Singapore (thanks to projects such as The Seafront on Meyer and Latitude), China and Vietnam, partly offset by an absence of acquisition fee income and rental revenue from commercial properties divested last year.

In Singapore, the group had sold 252 units at its Interlace condo as at end-September 2009 and said its 165-unit condo on the former Char Yong Gardens site will be launch-ready in Q4 2009.

In Vietnam, the group held a soft launch this month for 330 units in Mulberry Lane, a residential project in Hanoi. All the units have been booked and the group is targeting an official launch for the development, which will have a total of about 1,500 units, in early 2010.

For the first nine months of this year, CapitaLand posted net profit of $167.2 million, down 85.9 per cent from $1.18 billion in the same period last year. Ebit fell from $1.98 billion to $490.8 million.

The decrease was mainly attributed to lower divestment gains and an increase in impairment loss in the latest period. In addition, a net fair-value loss of $173.8 million from the revaluation of investment properties was posted in the first nine months of this year, compared with a net fair-value gain of $599 million in the same year-ago period.

In the first nine months of last year, the group had booked significant gains of $615.5 million - mainly from divesting its stake in Hitachi Tower, One George Street, Capital Tower Beijing and the Raffles City properties in China.

Group revenue rose 3.7 per cent in the first nine months to $2.12 billion.

Overseas Ebit contribution in 9M 2009 was $224.7 million or 45.8 per cent of group's total Ebit - against $1.2 billion or 62.4 per cent in the same year-ago period. The decrease in overseas Ebit was mainly due to lower contribution from China and Australia.

CapitaLand's Q3 2009 bottom line was an improvement from a $156.9 million net loss in Q2 this year and $42.9 million net profit in Q1.

The group trimmed net debt from $6.2 billion as at end-September 2008 to $5 billion at end-September 2009, resulting in a lowering of net debt-to-equity ratio from 0.51 to 0.35. Net asset value per share fell from $3.78 as at Dec 31, 2008 to $2.96 at Sept 30, 2009. CapitaLand had a 1-for-2 rights issue earlier this year which raised $1.84 billion.

CapitaLand will be holding an extraordinary general meeting on Friday to seek shareholders' approval for the proposed initial public offering (IPO) of its integrated shopping mall business under CapitaMalls Asia (CMA). A listing is slated by year-end. JPMorgan is sole financial adviser to the company.

The deal is expected to unlock value for CapitaLand shareholders.

UBS Investment Research estimates that the IPO could value CMA at around $8 billion to $10 billion, compared to book value of $5.3 billion. This would imply CapitaLand's revalued net asset value per share would increase to $4.91 to $5.36 - from $4.30 based on CMA's book value.

On the stock market yesterday, CapitaLand closed 13 cents lower at $4.30. The counter surged to $4.46 on Monday, reflecting a 21.5 per cent increase since CapitaLand first announced its plans for CMA earlier this month.