CapitaLand - Phillip Securities 2019-12-16: Ready For Takeoff

CAPITALAND LIMITED (SGX:C31) | SGinvestors.io CAPITALAND LIMITED (SGX:C31)

CapitaLand - Ready For Takeoff

  • Gaining critical mass across geographies and asset classes.
  • Higher quality and recurrent income forming a larger part of the business.
  • Maintain BUY with an unchanged target price of S$4.20.



Background



2020 Investment Merits/ Outlook


Playing to their strengths and unlocking value in new geographies and assets classes.

  • CapitaLand’s development business will be focused on the four key markets where they have an established track record and see growth potential – Singapore, China, Vietnam and India.
  • CapitaLand will be focusing on redevelopment opportunities in Singapore while deepening its presence in Vietnam, China and India by expanding into new asset classes – thereby unlocking the value from the acquisition of Ascendas-Singbridge by riding on its business parks, industrial and logistics expertise and presence in China and India.

Powering up twin drivers of recurring income.

  • CapitaLand’s recurring income model will be underpinned by the fund management and lodging platform. CapitaLand earns fees from the management of the asset in the various REITs and private funds, as well as management contract fees from the management of service residences franchised under the Ascott, Citadines, Somerset and Lyf brands.
  • CapitaLand also earns recurring income from investment property held on their books, and through its respective stakes in the REITs and funds. 83.6% of YTD9M19 EBIT was derived from investment properties and recurring in nature (YTD9M18: 83.5%), providing stability in earnings.
  • CapitaLand’s target of increasing AUM from S$71.7bn to S$100bn by 2024 and number of keys under management from 112,400 (of which c.45k are still under development) to 160,000 by 2023 will further increase the proportion of recurring income.

Residential development in China performing well.

  • Despite existing price caps in several tier 1 and tier 2 cities, China continues to provide CapitaLand with an accommodative environment for residential developments, with breakthrough sell-through rates of > 99% for certain new projects.


Recommendation

  • We maintain BUY with an unchanged target price of S$4.20. Our target price translates to a FY19e P/NAV ratio of 0.81x.
  • The outlook is positive as CapitaLand double-downs on their investment strategy of core-markets development play and grows recurring income through their fund management and lodging platform.





Natalie Ong Phillip Securities Research | https://www.stocksbnb.com/ 2019-12-16
SGX Stock Analyst Report BUY MAINTAIN BUY 4.200 SAME 4.200



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