CAPITALAND LIMITED
C31.SI
CapitaLand (CAPL SP) - Best EPS Profile
Maintain BUY; SGD3.83 TP
- We update market values/TPs for CAPL’s REITs and asset values. This lifts our TP to SGD3.83 from SGD3.71 on the back of RNAV upgrades.
- We expect CAPL to achieve its ROE target in 2017, even after lowering our EPS by 24% for the timing of project recognition and higher tax charges.
- CAPL offers the best earnings profile among Singapore developers and we see upside for its current yield of c.3%, as holding excess cash hurts ROEs.
- Maintain BUY.
Backed by Pre-sold Homes & Development Gains
- CAPL has the best earnings profile among our Singapore developers. Strong pre-sales from China should translate into earnings upon completion this year.
- Management guided that 65% of its c.7,000 homes due for completion has been sold.
- We also expect development gains after the completion of key Raffles City projects. These should help it achieve its ROE target in 2017.
Holding Excess Cash Hurts; Higher DPS?
- The completion of key projects over the next three years will add to its cash hoard of SGD4.2b.
- Coupled with stable cash flow from its investment properties, we see scope for higher dividends. Retaining excess cash will hurt its ROEs and derail its target of 8-12%.
- Our DPS forecasts of 10 Scts (FY15: 9 cts) translate into yields of over 3%.
Further Upside from Portfolio Reconstitution
- CAPL seeks to enhance shareholders’ value through portfolio reconstitution. It recently sold PWC Building and Rivervale Mall and plans to redevelop Funan.
- Further asset divestments or injections into its funds/REITs may allow it to lock in profits and bump up earnings.
Derrick Heng CFA
Maybank Kim Eng
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http://www.maybank-ke.com.sg/
2016-03-09
Maybank Kim Eng
SGX Stock
Analyst Report
3.83
Up
3.71
