CAPITALAND LIMITED
C31.SI
CapitaLand - East China on the Ground
- Visited six projects in Shanghai, Hangzhou and Suzhou.
- Expect a record year of sales with 8,000 homes at CNY14b in value. New financing options could lower costs in China.
- Maintain BUY and SGD3.88 TP, based on 15% RNAV discount.
Visited Shanghai, Hangzhou and Suzhou
- We visited six CapitaLand projects in Shanghai, Hangzhou and Suzhou (1 residential, 1 serviced apartment and 4 mixed developments) recently. These projects demonstrate the company’s ability to develop projects across a range of sub-asset classes.
- We remain positive post-visit and maintain our BUY rating and SGD3.88 TP on the stock.
Geographical focus, expect record year of home sales
- China accounts for 46% of total assets for CapitaLand and is a key market for the group.The company will stay within its area of competency and continue to focus on projects in Tier 1 and upper Tier 2 cities.
- Home sales in the country have benefited from a series of policy easing and management now expects a record year of sales with around 8,000 units worth CNY14b in value.
New funding sources, land banking strategy
- The company is exploring options to tap new sources of funding that could lower its financing costs in the country.
- It prefers to replenish its land bank via M&A or JVs instead of land auctions as land prices have appreciated at a faster pace than home prices.
- It would also look to acquire land as a group which would harness its strength as a developer of integrated projects and provide opportunities across sub asset classes.
Competitive advantages, reiterates ROE target
- Management sees its relationships with tenants and customers as a competitive advantage that is hard to replicate.
- It reiterated its ROE target of 8-12% and sees double digit returns for its projects in China as a key driver of this target.
Derrick Heng CFA
Maybank Kim Eng
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http://www.maybank-ke.com.sg/
2015-11-19
Maybank Kim Eng
SGX Stock
Analyst Report
3.88
Same
3.88
