CapitaLand Limited - OCBC Investment 2016-06-13: Opens co-working space at Capital Tower

CapitaLand Limited - OCBC Investment 2016-06-13: Opens co-working space at Capital Tower CAPITALAND LIMITED C31.SI 

CapitaLand Limited - Opens co-working space at Capital Tower

  • Opens 22k sq ft co-working space
  • JV with Collective Works
  • Actively conducting share buybacks

Opens co-working space at Capital Tower with JV partners

  • CapitaLand (CAPL) announced that it has opened, with its JV partner Collective Works, a premium co-working space named Collective Works Capital Tower which occupies the entire 12th level of Capital Tower. 
  • This is the first premium co-working space in a Grade A office building in Singapore’s CBD and will take up 22k sq ft of space. The space is designed to enhance productivity and facilitate collaboration between fast-growing companies, and we understand from management that interest from a broad range of industries (including global venture capital firm 500 Startups, marketing, computer programming, data analytics companies) has been very strong. 
  • The group is currently in discussion with more than 60 companies to join Collective Works Capital Tower over the next few months. 
  • Now that we are in a difficult office rental market, we like that CAPL is forward- looking and is leveraging its market leadership position and network to reach out to a vibrant new set of office tenants.

Conducting company share buybacks

  • We also note that CAPL has taken advantage of the recent share price weakness to conduct company share buybacks in the open market. So far, the group has gone into the market on 10 occasions to purchase some 16.2m shares for S$49.3m, which translates to an average price of S$3.03 per share. 
  • As this translates to a 26.9% discount to book value, we see these buybacks to be an accretive use of capital, particularly now that CAPL sits on significant dry powder of S$3.9b in cash and equivalents (and a relatively benign net gearing of 47%). 
  • While CAPL shares have declined 9.6% year-to-date, we believe that the shares have been overly punished due to macro- economic concerns and highlight that bottom-up operating numbers from the company has been firm in 1Q16. For instance, 1Q16 home sales in China came in at a healthy clip with 3,377 units sold, up 3x versus 1,306 units in 1Q15. 
  • Maintain BUY with an unchanged fair value estimate of S$3.68.

Eli Lee OCBC Securities | http://www.ocbcresearch.com/ 2016-06-13
OCBC Securities SGX Stock Analyst Report BUY Maintain BUY 3.68 Same 3.68