CAPITALAND LIMITED
C31.SI
CapitaLand (CAPL SP) - China Holds the Key
Maintain BUY, new TP of SGD3.71
- We update our valuation for the group and incorporate updated analysis and fair-value gains for its projects in China.
- We now apply varying discounts to its sub-segments in our RNAV, which is revised from SGD4.56 to SGD4.77. This lowers our TP to SGD3.71 from SGD3.88.
- Our RNAV incorporates TPs for its listed REITs and market values for units not covered. It implies 0.9x P/BV or -0.4SD from its 10-year average.
- Maintain BUY with catalysts expected from achievement of ROE target.
Could potentially hit ROE target in 2017
- Incorporating estimated fair-value gains for key projects under development, we expect CapitaLand to achieve its ROE target of 8-12% in 2017.
- 2017 bottom line should jump from project completions that would allow the company to book meaningful fair-value gains.
- Three key Raffles City projects in China’s Changning, Hangzhou and Shenzhen are scheduled for completion in 2016/17.
Singapore office weakness factored in
- Our RNAV already builds in a weaker Singapore office market.
- Incorporating our TP for CapitaLand Commercial Trust (HOLD, TP SGD1.25), we believe the REIT’s implied P/BV of 0.7x already accounts for downside in this segment.
- Pre-sold homes in China to underpin 2016 CapitaLand is benefiting from a series of supportive policy measures in China.
- Management expects 2015 to be a record year with around 8,000 units worth CNY14b sold there (note). We expect their profit recognition to underpin its earnings in 2016.
Derrick Heng CFA
Maybank Kim Eng
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http://www.maybank-ke.com.sg/
2016-01-13
Maybank Kim Eng
SGX Stock
Analyst Report
3.71
Down
3.88
