CAPITALAND LIMITED (SGX:C31)
CapitaLand - Growth-Focused Powerhouse
- Proposed restructuring and demerger of investment-management business to allow unitholders to realise immediate upside from development business, at 0.95x BV offer compared to CapitaLand’s 20-30% historical discounts to NAV.
- Implied consideration of S$4.102 is 27% premium to 1-month pre-announcement VWAP and 8-18% discounts to IFA’s valuation range, suggesting upside for CapitaLand Investment (CLI).
- Maintain BUY call on CapitaLand and target price of S$4.38, based on 80% probability-weighted RNAV that the demerger will be approved and SOTP. Catalysts expected from faster asset recycling and a hospitality recovery.
Recap: demerger of CapitaLand’s development business from investment-management platform
- Recall that under CapitaLand (SGX:C31)’s proposed restructuring scheme in March 2021, shareholders of one CapitaLand share will receive one CapitaLand Investment (CLI) share valued at S$2.823 (1x NAV), 0.155 unit of CapitaLand Integrated Commercial Trust (SGX:C38U) and S$0.951 in cash for a total consideration of S$4.102. The S$0.328 for CapitaLand Integrated Commercial Trust was based on its last traded price of S$2.122. The implied consideration excludes CapitaLand’s proposed FY20 dividend of S$0.09.
- An EGM for the restructuring will be held on 10 August 2021. If approved, the estimated date for the delisting of CapitaLand and listing of CLI is 17 September 2021.
Release of Independent Financial Advisers’ valuation and introductory document for CLI
- The Independent Financial Advisers (IFA) has valued CapitaLand Investment (CLI) using SOTP, breaking CLI down into five businesses:
- investment management (P/E),
- lodging management (EV/EBITDA),
- investment properties (RNAV),
- unlisted funds (carrying value) and
- listed funds (REITs/business trusts at market value).
- The IFA has given CLI a valuation range of S$3.19- 3.62. This translates to S$4.47-4.90 for one CapitaLand share, or 8-18% discounts to the implied purchase consideration of S$4.102/share. The latter provides upside from CapitaLand’s pre-announcement WVAP while IFA's valuation points to upside for CLI.
Outlook
- CapitaLand’s focus to the development of its fund-management and lodging-management segments will be better appreciated under CapitaLand Investment (CLI)’s asset-light, capital-efficient business model. Clear growth targets have been set for these two businesses.
- CLI aims to increase funds under management from S$78bn to S$100bn by 2024. Its growth targets apply to both its investment properties and future development projects, ensuring that its balance sheet can be monetised within 3-4 years for reinvestments.
- The lodging segment, which manages 123K room keys, of which 43% are under development and have not begun contributing, is aiming for 160k keys by 2023.
Maintain BUY and probability-weighted RNAV target price of S$4.38
- No change to our earnings forecasts or target price for CapitaLand, pending completion of the demerger. See details of valuation in report attached below.
- Potential catalysts include faster asset recycling and a recovery of the hospitality sector.
- See
Natalie Ong
Phillip Securities Research
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https://www.stocksbnb.com/
2021-07-26
SGX Stock
Analyst Report
4.380
SAME
4.380
