CapitaLand - RHB Invest 2016-10-26: Sets up USD1.5bn RCCIP III to boost ROEs

CapitaLand - RHB Invest 2016-10-26: Sets up USD1.5bn RCCIP III to boost ROEs CAPITALAND LIMITED C31.SI

CapitaLand - Sets up USD1.5bn RCCIP III to boost ROEs

What's New? 

  • CapitaLand announced establishment of its third integrated development private investment vehicle in China - Raffles City China Investment Partners III (RCCIP III)
  • The partnership has raised equity of USD1.5bn (~SGD2.0bn), making it the largest private capital raise that CapitaLand has originated. The fund will have a life of eight years and will primarily target integrated developments in key gateway cities in China. 
  • CapitaLand will subscribe for 41.7% sponsor stake in RCCIP III amounting to USD625.5m (~SGD870m). Other major investors include Canada Pension Plan Investment Board (CPPIB), which will subscribe to a 25% stake (USD375.0m).
  • Currently, CapitaLand has about nine Raffles City integrated developments in Singapore and China including projects under construction spanning across 4m sqm and worth about SGD15.0bn.

Our View 

  • We are positive on the move as setting up of funds will help in boosting CapitaLand's slowing Return on Equity (ROE). The fund is expected to have an Assets under Management (AUM) of USD 3.0bn, including the debt component, when fully invested. Assuming a conservative 30bp AUM fee could add USD9m (SGD13m) per annum to CapitaLand's recurring fee income. 
  • Additionally, CapitaLand can also earn project management fee and asset management fee during project construction and post completion.
  • RCCIP III will be targeting Tier-1 and Tier-2 cities in China, where it still sees a robust underlying demand and will look at both greenfield and brownfield assets for integrated development. CapitaLand currently manages 15 real estate private equity funds and five real estate investment trusts (REITs) with AUM worth over SGD45.5bn and targets to launch six new funds with total AUM of up to SGD 10bn by 2020.
  • We have Neutral recommendation on CapitaLand with a TP of SGD3.15. 
  • Key re-rating catalysts are setting up of more PE funds and removal of property cooling measures in China and Singapore.

Vijay Natarajan RHB Invest | http://www.rhbinvest.com.sg/ 2016-10-26
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