Share Price S$3.03
Target Price S$3.83
CapitaLand is one of the largest listed real estate companies in Asia with an asset value of S$36.4b (excluding treasury cash) as at Sep 13. Its core businesses in real estate, hospitality and real estate financial services focus on gateway cities in Asia- Pacific, Europe and the Middle East. The company’s real estate and hospitality portfolio spans more than 90 cities in over 20 countries. Listed subsidiaries and associates include CapitaMalls Asia, The Ascott Group, Australand, CapitaMall Trust, CapitaCommercial Trust, Ascott Residence Trust, CapitaRetail China Trust and Quill Capita Trust.
• Working towards 8-12% ROE target. Immediately after taking over as President and Group CEO, Mr Lim Ming Yan realigned the group into four main businesses: CapitaLand Singapore, CapitaLand China, CapitaMalls Asia and The Ascott Ltd. The move is part of CapitaLand’s strategy to simplify its organisational structure and sharpen its focus on key growth markets. CapitaLand has set an 8-12% ROE target focusing on two core markets, Singapore and China, with China to form 50% of exposure, up from 39% today. The emphasis is on its core strength in integrated/mixed developments, maintaining two-thirds investment assets and one-third assets under development.
• Partially monetising Australand stake. CapitaLand sold a 20% stake in Australand following the secondary placement of 115.66m shares at A$3.685/share. Key reasons given for the divestment include a 50% increase in free float, which will improve Australand’s ranking in key indices, and to broaden the institutional shareholder base for Australand. The proceeds of S$485.3m will be redeployed towards new opportunities in Singapore and China. CapitaLand will de-consolidate Australand as a subsidiary following the reduction in its stake to 39.1% from 59.1% previously. There is minimal impact to our RNAV valuations ( < 0.5%).
• Management guided that Singapore residential sales will be moderated by the cumulative impact of various property cooling measures. However, management remains positive on long-term prospects in the Singapore property market, supported by a resilient economy and policies to support population growth. CapitaLand plans to focus on investing in well-located sites to build up its pipeline of residential and commercial developments.
• Positive outlook for China. The outlook for the Chinese economy is stabilising, and with structural changes in the economy, growth will remain stable and sustainable. China shopping malls and CapitaLand’s Raffles City portfolio will benefit from healthy consumer demand and strong retail sales. Raffles City Chengdu and Ningbo (completed in 2012) are doing well, with retail space largely committed, while office leasing is about 50% committed.
• Maintain BUY, target price S$4.35, pegged at a 15% discount to its RNAV of S$5.11/share. The stock is currently trading at a steep 39% discount to its RNAV and is at an attractive 0.8x 2013F P/B.
Publish date: 28/11/13