CapitaLand - DBS Research 2017-08-16: Rising Prospects Of Higher Dividends

CapitaLand - DBS Vickers 2017-08-16: Rising Prospects Of Higher Dividends CAPITALAND LIMITED C31.SI

CapitaLand - Rising Prospects Of Higher Dividends


Maintain BUY, TP maintained at S$4.35. 

  • We continue to see value in CapitaLand Limited (CAPL) as we see strong catalysts in the medium term to drive its share price higher. We believe that CAPL will see higher valuations on the back of improved property market sentiment, leading to strong sales. 
  • In addition, continued asset recycling activities could translate to higher gains and boost ROEs going forward.


Where we differ. 


Target price higher than consensus average; potential for higher dividends which will surprise investors. 

  • We believe that our above consensus-average target price of close to 1x forward P/NAV is achievable given expectations that the group will deliver a robust set of results on the back of strong revaluation gains for its commercial portfolio, and locked-in sales for its residential portfolio. 
  • Most importantly, with recurring income projected to grow strongly from FY17F onwards, we see increasing potential that CAPL may raise dividends (payout ratio < 50%) progressively over the next few years on the back of a firmer footing, a non-consensus view at this moment. This will send a strong signal to investors of management’s confidence in the group’s financial position and earnings outlook. 

Ready to pounce on opportunities. 

  • We believe that it is an opportune for the group to turn more active in terms of merger & acquisitions (M&A) to grow inorganically. 
  • Acknowledging strong competition for land, management is looking at opportunities to acquire land through JVs and remains keen to invest in value-added opportunities where the group can drive higher returns through active management.


Valuation

  • Our target price of S$4.35 is based on a 10% discount to our adjusted RNAV of S$4.81/share.


Key Risks to Our View

  • Slowdown in Asian economies. The risk to our view is if there is a slowdown in Asian economies, especially China, which could dampen demand for housing and private consumption.




Derek TAN DBS Vickers | Rachel TAN DBS Vickers | http://www.dbsvickers.com/ 2017-08-16
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 4.350 Same 4.350



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