CapitaLand - CGS-CIMB Research 2021-07-21: Honing Its Focus For Faster Growth

CAPITALAND LIMITED (SGX:C31)

CapitaLand - Honing Its Focus For Faster Growth

The implied consideration for CapitaLand is at a 9-19% discount to IFA valuation.
Its restructuring exercise should enable Capitaland Investment (CLI) to accelerate growth.
Reiterate ADD rating on CapitaLand with an unchanged target price of S$4.04.

The letter by CapitaLand (SGX:C31)’s independent financial advisors (IFA) on its proposed restructuring exercise and the introductory document for Capitaland Investment (CLI) have been released.
To recap, under this proposed exercise, for every 1 CapitaLand share, eligible shareholders will receive 1 CLI share, 0.155 CapitaLand Integrated Commercial Trust (CICT, SGX:C38U) units and S$0.951 cash, implying a consideration of S$4.102 (based on 1x Dec 2020 NAV of S$2.823 for CLI, and S$0.328 for CICT units based on a 1-month VWAP of S$2.12/CICT unit).
The implied value is at a 9- 19% discount to the IFA valuation of S$4.47-4.90/CapitaLand share. An EGM for this proposed exercise is scheduled for 10 Aug 2021.
If all approvals are obtained, CapitaLand will be delisted and Capitaland Investment (CLI) listed on 17 Sep 2021.

Capitaland Investment (CLI)’s business segments comprise investment impact of COVID-19 on its lodging business.
We believe when operating conditions normalise, a recovery in contributions and asset values of its lodging, retail and office business could provide some tailwind to CLI’s earnings and valuations.

Capitaland Investment (CLI)’s growth strategy includes growing its FUM with a target of reaching S$100bn by 2024, expanding its lodging business through the scaling up of its asset-light management and franchise contracts, to reach 160k units under management by 2023, and to continue executing on its capital recycling strategy.
Its recently-obtained private equity fund manager license in China to carry out RMB-denominated capital raising and provide fund management services for prospective RMB funds in China could also help accelerate its FUM growth strategy.
In addition, as it has S$10bn worth of investment properties that could be monetised over the next 3-4 years, we anticipate asset and capital recycling to drive future returns.

We leave our FY21-23F earnings per potential further valuation upside with greater clarity to Capitaland Investment (CLI)’s valuations.
See
Key potential catalyst for share price outperformance is a faster-than-projected pace of asset recycling.
Downside risks include weaker-than-expected macro outlook that could slow its asset recycling activities.

LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2021-07-21

SGX Stock Analyst Report ADD MAINTAIN ADD 4.040 SAME 4.040