CapitaLand - CGS-CIMB Research 2021-03-22: Restructuring For Faster Growth


CapitaLand - Restructuring For Faster Growth

  • CapitaLand proposes to consolidate investment management and lodging platforms and to privatise real estate development business.
  • Creating a leading global real estate investment manager and unlocking value through implied consideration.
  • Reiterate ADD with a higher target price of S$4.04.

Optimising growth via strategic restructuring

  • CapitaLand (SGX:C31) and CLA Real Estate Holding Pte Ltd (CLA), the existing controlling shareholder of the company, proposed a scheme of arrangement for
    1. the restructuring of the Group’s business to consolidate its investment management platforms and lodging business into Capitaland Investment Management (CLIM) and
    2. privatise the real estate development business.
  • Post restructuring, Capitaland Investment Management (CLIM) will be the largest real estate investment manager (REIM) in Asia and the third-largest REIM globally. Capitaland Investment Management will be listed on the Singapore Exchange and 51.8% owned by CLA while CapitaLand will be delisted. The transaction is subject to shareholders’ approval and is scheduled to complete in 4Q21.

Implied consideration at attractive premium to current CapitaLand's share price

Creating a leading global real estate investment manager

  • We like the transaction as it sharpens CapitaLand’s focus and positions it as an asset-light and capital efficient business through Capitaland Investment Management (CLIM) as well as unlocks value for investors through the scheme, in our view.
  • Capitaland Investment Management will be an Asian-centric fully-integrated Real Estate Investment Manager (REIM) with funds and property management capabilities across multiple asset classes. It has stakes in listed REITs and private funds valued at S$13.3bn and funds under management of S$77.6bn, that provide a stable, recurring income base while its full chain lodging management business with real estate AUM of S$27.7bn, offers another growth driver. In addition, its portfolio of S$10.1bn worth of investment properties provides a visible and quality pipeline for monetisation.
  • Proforma NAV of Capitaland Investment Management stands at S$14.7bn as at Dec 2020 with assets under management of S$115bn. Meanwhile, Capitaland Investment Management would continue to benefit as part of the privatised CapitaLand ecosystem with the latter’s integrated suite of real estate capabilities while the privatised development entity will be able to develop and incubate projects as a key source pipeline for Capitaland Investment Management.

Reiterate ADD rating on CapitaLand

LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2021-03-22
SGX Stock Analyst Report ADD MAINTAIN ADD 4.04 UP 3.420