CapitaLand China Trust Just Reported A Surprise Loss: Here's What Analysts Think Will Happen Next

Last week, you might have seen that CapitaLand China Trust (SGX:AU8U) released its full-year result to the market. The early response was not positive, with shares down 2.8% to S$1.38 in the past week. Revenues missed expectations, with sales of S$211m falling 10% short of forecasts. Earnings correspondingly dipped, with CapitaLand China Trust reporting a statutory loss of S$0.0096 per share, where the analysts were expecting a profit. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

See our latest analysis for CapitaLand China Trust

Taking into account the latest results, the most recent consensus for CapitaLand China Trust from four analysts is for revenues of S$374.7m in 2021 which, if met, would be a substantial 78% increase on its sales over the past 12 months. Earnings are expected to improve, with CapitaLand China Trust forecast to report a statutory profit of S$0.11 per share. In the lead-up to this report, the analysts had been modelling revenues of S$374.7m and earnings per share (EPS) of S$0.098 in 2021. Although the revenue estimates have not really changed, we can see there's been a nice gain to earnings per share expectations, suggesting that the analysts have become more bullish after the latest result.

There's been no major changes to the consensus price target of S$1.51, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on CapitaLand China Trust, with the most bullish analyst valuing it at S$1.70 and the most bearish at S$1.35 per share. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. The analysts are definitely expecting CapitaLand China Trust's growth to accelerate, with the forecast 78% growth ranking favourably alongside historical growth of 0.6% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 8.4% per year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect CapitaLand China Trust to grow faster than the wider industry.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards CapitaLand China Trust following these results. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple CapitaLand China Trust analysts - going out to 2022, and you can see them free on our platform here.

We don't want to rain on the parade too much, but we did also find 3 warning signs for CapitaLand China Trust (2 make us uncomfortable!) that you need to be mindful of.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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