Asset recycling at work
- Bedok Mall divested for S$783m
- Recycling capital to generate higher returns; demonstration of management's ability to constantly realise value
- Maintain BUY, TP S$4.11
Divestment of Bedok Mall to CapitaLand Mall Trust for S$780m.
- CapitaLand (CAP) announced the divestment of Bedok Mall for S$783m to its managed REIT, CapitaLand Mall Trust (CMT). The agreed price is close to the latest valuation of S$775m (by CBRE) as of 30th Jun’15.
- This transaction is expected to be conditional upon CMT unitholders’ approval, expected by 4Q15.
- The divestment price implies an exit per square foot (psf) price of c.S$3,500 and an exit yield of 5.1%, which we believe is attractive.
- CAPL will receive net proceeds of c.S$464m including 72m new units of CMT post repayment of existing debt.
- We understand that the group is also expected to reap net gains of c.S$30m from this divestment (based on latest reported valuation).
Re-cycling capital; proceeds to be deployed to other opportunities.
- With the Bedok Mall having achieved a level of operational stability, we find this to be an opportune time to divest the property to CMT and re-deploy capital to other development projects with higher returns, keeping in mind the group’s longerterm target of 8%-12% ROE.
- In addition, CAPL can continue to partake in the growth of the mall through higher management fees and through its increased stake in CMT post acquisition.
Maintain BUY, TP S$4.11, based on 20% discount to RNAV.
- We are maintaining our numbers, pending the sale post EGM.
- CAPL's ability to actively reconstitute its portfolio through active asset management and strategic divestments of assets into its managed REITs or managed funds will be a key driver for the company to maintain a lean and robust balance sheet going forward.
- Maintain BUY, TP of S$4.11 based on 20% discount to RNAV.
(Derek TAN, Rachael TAN, Mervin SONG)
Source: http://www.dbsvickers.com/
