Maybank Kim Eng Research 2015-07-13: CapitaLand - Ascott partners Qatar Investment Authority (QIA). Maintain HOLD.

Ascott partners QIA 

  • Ascott forms a 50:50 JV with Qatar Investment Authority. Serviced residence fund with initial AUM of USD600m. 
  • Provides the fresh capital to fund expansion for target to double serviced residence portfolio by 2020. 
  • Maintain HOLD and SGD3.85 TP. Stock appears fairly priced and we do not see material near-term catalyst. 

What’s New 

  • CapitaLand announced Ascott has entered into a 50:50 JV with Qatar Investment Authority (QIA) to set up a serviced residence fund with an initial AUM of USD600m. 
  • While there is no geographical restriction, this fund will initially target assets in Asia Pacific and Europe. 
  • There are no seed assets for this new JV, but management does not rule out acquiring assets from the partners in the future. 
  • This is part of CapitaLand’s plan to grow its scale, fees income base and launch five to six funds with a total AUM of SGD8-10b by 2020. 
  • Management highlighted its IRR target of mid-to-high single digit and 12-18% for assets in Singapore and China on an un-leveraged basis. 

What’s Our View 

  • We view this JV with a strong capital partner positively as it will provide CapitaLand with an alternate source of capital to fund its expansion. 
  • However, management stressed that this partnership is not driven by the recent MAS rulings and its publicly-listed REITs remains a key source of capital. 
  • Operationally, it will provide fresh capital for Ascott to achieve its target of 80,000 units under management by 2020, from the current 40,943. 
  • Maintain HOLD as the stock appears fairly priced and we do not see material catalyst in the near term. 
  • TP remains SGD3.85, based on 15% discount to RNAV of SGD4.53. 

(Derrick Heng, CFA)

Source: http://www.maybank-ke.com.sg