CapitaLand - Phillip Securities 2021-07-26: Growth-Focused Powerhouse


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

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:
    1. investment management (P/E),
    2. lodging management (EV/EBITDA),
    3. investment properties (RNAV),
    4. unlisted funds (carrying value) and
    5. 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.


  • 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

Natalie Ong Phillip Securities Research | https://www.stocksbnb.com/ 2021-07-26
SGX Stock Analyst Report BUY MAINTAIN BUY 4.380 SAME 4.380