CapitaLand - Maybank Kim Eng 2016-03-09: Best EPS Profile

CapitaLand - Maybank Kim Eng 2016-03-09: Best EPS Profile 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 | http://www.maybank-ke.com.sg/ 2016-03-09
Maybank Kim Eng SGX Stock Analyst Report BUY Maintain BUY 3.83 Up 3.71