CAPITALAND LIMITED (SGX:C31)
CapitaLand - Better, Faster, Stronger
- Gaining critical mass across geographies and asset classes.
- Higher quality and recurrent income forming a larger part of the business.
- Maintain ACCUMULATE with an unchanged target price of S$4.00.
Background
- CAPITALAND LIMITED (SGX:C31) is one of Asia’s largest diversified real estate groups. Headquartered and listed in Singapore, it owns and manages a global portfolio worth over S$103bn as of 31 March 2019.
- CapitaLand’s portfolio spans across diversified real estate classes which include commercial, retail; business park, industrial and logistics; integrated development, urban development; as well as lodging and residential.
- With a presence across more than 200 cities in over 30 countries, the Group focuses on Singapore and China as its core markets, while it continues to expand in markets such as India, Vietnam, Australia, Europe and the USA.
Investment Merits/Outlook
Gaining critical mass across geographies and asset classes.
- CapitaLand completed its acquisition of Ascendas-Singbridge (ASB) on 30 June 2019, immediately bringing CapitaLand a new asset class – industrial parks. It will raise CapitaLand exposure to emerging markets, such as India – which it previously did not have an investment management platform.
- The enlarged entity will now have an improved scale in acquiring assets or winning projects. CapitaLand’s management had expressed confidence in boosting its post-transaction NAV, mainly via the combined fund management platform as well as the combined development pipeline.
Stability from recurring income.
- CapitaLand’s move into a primarily recurring income model has borne fruit, with recurring income from investment properties comprising 84% of 1Q19 EBIT. In addition, ASB will add c.30% of recurring income from its two REITs, one business trust and seven private funds and expand its REITs and funds AUM base in excess of 20%.
Residential development in China performing well.
- Despite existing price caps in several tier 1 and tier 2 cities, China continues to provide CapitaLand an accommodative environment for residential developments, with breakthrough sell-through rates of > 99% for certain new projects. CapitaLand’s presence in China will be complemented with that of ASB’s presence within the industrial park space in China.
Recommendation
- The outlook is positive as we see upside in CapitaLand’s and ASB’s operational synergy that will absorb the modest NAV dilution.
- We maintain our ACCUMULATE rating with an unchanged target price of S$4.00.
- Our target price translates to a FY19e P/NAV ratio of 0.81x.
Tara WONG
Phillip Securities Research
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https://www.stocksbnb.com/
2019-07-12
SGX Stock
Analyst Report
4.000
SAME
4.000
