Friday, February 18, 2011

CapitaMalls Asia to standardise new malls

CAPITAMALLS Asia (CMA) will start standardising various aspects of its new malls so it can cut costs and quickly add new outlets in fast-growing markets like China.

The 'cookie-cutter malls' will share common design, development and models of leasing and management but have their own tenant mix.

Chief executive Lim Beng Chee told a results briefing yesterday that the strategy will allow CMA to cut construction time by a third to two years, which in turn means cost savings and higher returns sooner.

This will help CMA to stay ahead of the competition and reach its goal of doubling its portfolio of malls in China to 100 over the next three to five years, he said.

He added that the malls - he terms them third-generation or 3G malls - will have enough on offer to give customers a proper day out.

'They will be very much like IMM (shopping mall in Jurong) with a cinema, in terms of the scale, size and tenant mix. A family will probably spend six hours there and still have lots to do,' he said.

CMA hopes to begin work on such a mall in the south of China by the first half of this year. India is also on the cards if the country opens up more to foreign investors.

'We still see a lot of opportunity for us to grow the business. The question is if we can run fast enough to capture the opportunity and if we can do it at a lower risk and exert the capital to run it,' Mr Lim said.

Chief financial officer Ng Kok Siong said CMA expects to have between $1 billion and $2 billion of deals on the table at any one point, so it needs to be proactive in tapping capital and look at deals such as the recently tendered Punggol site which achieved a top bid of $1 billion.

Mr Lim noted that Ion Orchard might be divested and placed in a real estate investment trust only if CMA needs the money and when the mall achieves stabilised returns.

Ion contributes significantly to CMA's bottom line and divesting it will hit the results next year, he said.

'But for argument's sake, today if a project is so good that I need the money, then I may want to sacrifice next year's income, divest then recycle, so it depends on opportunities.'

CMA said it will complete five malls in China and one in India this year. It will also take about 30 Singapore retailers on a business mission to explore opportunities in Chengdu and Shanghai.

Mr Lim also said the residential units at the recently acquired mixed development site in Bedok Town Centre - a joint venture between CMA and CapitaLand Residential - is targeted for launch by the end of this year.

The firm reported a 15.2 per cent drop in fourth-quarter net profit to $144 million, even with a re-evaluation gain of $110 million, due to lower sales of The Orchard Residences. Full-year profits were up 8.7 per cent to $422 million.

Revenue for the three months ended Dec 31 fell 16.5 per cent to $55.2 million, but was up 7.2 per cent to $245 million for the year. CMA's profit was buoyed by gains from associates and jointly controlled entities. A dividend of two cents per share was also proposed, double that a year ago.

Quarterly earnings per share fell to 3.7 cents from 6.2 cents in the same period last year, while net asset value per share was $1.50 as of Dec 31, up from $1.41 cents as in the previous year. CMA shares closed down four cents at $1.92 yesterday.

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