Thursday, August 8, 2013

CapitaLand : Key takeaways from Hong Kong NDR (CS)

Price (02 Aug 13, S$) 3.30
Target price (S$) 4.53¹

 Key takeaways from Hong Kong NDR
■ CS hosted CapitaLand’s post-1H13 NDR in Hong Kong. CAPL was represented by CFO Arthur Lang, SVP Investor relations Harold Woo and AVP CFO’s office Chang Rui Hua. Many investors were keen on getting updates after the company’s recent organisational restructuring, especially given the recent changes include the perceived “U-turn” on Australand (ALZ).

■ Key highlights from the NDR. (1) ALZ is now a “key” investment, although still a non-core. The M&A process concluded with no compelling-enough bids. Longer-term plan is to reduce residential exposure, which could see ALZ re-rating as a purer commercial and industrial play. (2) Vietnam and storage business are also seen as the other two “key” investments, where CAPL prefers to retain the optionality (no immediate divestment, but longer term may consider exiting). (3) Eventually, exit from non-core, such as the recent UK sale (with a small gain), in 3Q.

■ How to achieve the 8-12% ROE target? Essentially, management plans to achieve ROE targets by: (1) exiting businesses which are a drag to ROEs; (2) capital recycling as and when it deems fit; (3) build on scalability—better economies of scale drives ROEs; (4) increase time-to-market by building more standardised and less iconic projects (which take longer to build and cost more); and (5) managing corporate and interest expenses.

■ 1H13 results highlights. Core PATMI (ex. revaluations, impairment, divestment gains) rose 43% YoY to S$241.3 mn, in line with expectations at 45% of our FY13E, but below the street’s at 32%. Excluding a S$27.7 mn one-off loss on the repurchase of CBs, its core profit was 50% of our FY13 estimate. We expect a better 2H13 with more residential profits, improved performance at CMA, and interest savings from CB repurchases, and maintain our OUTPERFORM rating. At 0.89x P/B, CAPL trades at a 38% discount to RNAV of S$5.32.

Source/Extract/Excerpts/来源/转贴/摘录: Credit Suisse
Publish date: 05/08/13

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