CapitaLand
Company Update Sliding into a Quagmire
Analyst
Wilson LIEW
[email protected]
(65) 6432 1454
Price $4.17
Target $4.48
ST Index 2,541.15
Historical Chart
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12-Sep-07
10-Oct-07
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05-Dec-07
02-Jan-08
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27-Feb-08
26-Mar-08
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18-Jun-08
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13-Aug-08
10-Sep-08
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
Price ($) Vol ('000)
Performance 1m 3m 6m
Absolute (%) -14.1 -27.2 -30.8
Relative (%) -5.8 -14.4 -21.4
Stock Information
Ticker code CATL.SI
CAPL SP
Market cap (US$ b) 8,196.3
52-week high (S$) 8.400
52-week low (S$) 4.110
Shares issued (m) 2,823.1
6m avg d.vol (US$m) 48.0
Free float (%) 60.3
Major shareholders (%)
Temasek Holdings (39.7)
Janus Capital (7.1)
Key Indicators
ROE (%) 11.4
Net gearing (%) 56.6
NAV (1H08) $3.68
I nterest cover (x) 3.5
In a share-price slump
CapitaLand’s share price has slumped about 33% YTD, in tandem with
the FSTRE Index. We believe that this is due to concerns about the
weakening Singapore residential market, as well as mounting concerns
about China’s property market, where CapitaLand has invested about
30% of its total assets.
Still busy monetising assets
CapitaLand has been able to divest a number of its commercial
properties, including the four Raffles City developments in China, Menara
Citibank, the Capital Tower in Beijing and the Somerset Orchard. Net
gains from these divestments amount to about $402.5m. Assuming the
cash proceeds are used purely to repay debt, CapitaLand’s net gearing
could potentially be reduced from 0.68x to 0.58x.
Signs of the blues in red China
Recent news out of China depicted a rather grim picture of the property
market. Some residential property developers have reportedly slashed
prices to generate sales. With more than 3m sq ft of unlaunched
residential GFA in China, CapitaLand could face short-term price
pressures. CapitaLand takes a long-term view on China, but we have
marked down our ASP assumptions by 10-15%.
Increasing majority stake in Australand
Following the rights issue by Australand (ALZ) of A$0.60/unit that raised
about A$461m, CapitaLand’s stake in ALZ increased from 54.2% to
59.3%. CapitaLand has repeatedly emphasized that ALZ is a core
business unit, and will jointly seek opportunities in Asia in the industrial
and logistics properties sector, which is ALZ’s area of expertise.
Adopting a cautious view
We have adjusted our ASP and launch assumptions for CapitaLand’s
residential developments, and we are conservatively marking its effective
stake in the Raffles City developments in China to the transacted value.
For FY09-10, we have revised our earnings forecast by -10.9% and
-7.4% respectively. Our new target price is $4.48 – based on a 10%
discount to FY09 RNAV versus parity previously – to account for the
increased risks in the challenging environments. Downgrade to HOLD.
Company Update Sliding into a Quagmire
Analyst
Wilson LIEW
[email protected]
(65) 6432 1454
Price $4.17
Target $4.48
ST Index 2,541.15
Historical Chart
3.00
4.00
5.00
6.00
7.00
8.00
9.00
12-Sep-07
10-Oct-07
07-Nov-07
05-Dec-07
02-Jan-08
30-Jan-08
27-Feb-08
26-Mar-08
23-Apr-08
21-May-08
18-Jun-08
16-Jul-08
13-Aug-08
10-Sep-08
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
Price ($) Vol ('000)
Performance 1m 3m 6m
Absolute (%) -14.1 -27.2 -30.8
Relative (%) -5.8 -14.4 -21.4
Stock Information
Ticker code CATL.SI
CAPL SP
Market cap (US$ b) 8,196.3
52-week high (S$) 8.400
52-week low (S$) 4.110
Shares issued (m) 2,823.1
6m avg d.vol (US$m) 48.0
Free float (%) 60.3
Major shareholders (%)
Temasek Holdings (39.7)
Janus Capital (7.1)
Key Indicators
ROE (%) 11.4
Net gearing (%) 56.6
NAV (1H08) $3.68
I nterest cover (x) 3.5
In a share-price slump
CapitaLand’s share price has slumped about 33% YTD, in tandem with
the FSTRE Index. We believe that this is due to concerns about the
weakening Singapore residential market, as well as mounting concerns
about China’s property market, where CapitaLand has invested about
30% of its total assets.
Still busy monetising assets
CapitaLand has been able to divest a number of its commercial
properties, including the four Raffles City developments in China, Menara
Citibank, the Capital Tower in Beijing and the Somerset Orchard. Net
gains from these divestments amount to about $402.5m. Assuming the
cash proceeds are used purely to repay debt, CapitaLand’s net gearing
could potentially be reduced from 0.68x to 0.58x.
Signs of the blues in red China
Recent news out of China depicted a rather grim picture of the property
market. Some residential property developers have reportedly slashed
prices to generate sales. With more than 3m sq ft of unlaunched
residential GFA in China, CapitaLand could face short-term price
pressures. CapitaLand takes a long-term view on China, but we have
marked down our ASP assumptions by 10-15%.
Increasing majority stake in Australand
Following the rights issue by Australand (ALZ) of A$0.60/unit that raised
about A$461m, CapitaLand’s stake in ALZ increased from 54.2% to
59.3%. CapitaLand has repeatedly emphasized that ALZ is a core
business unit, and will jointly seek opportunities in Asia in the industrial
and logistics properties sector, which is ALZ’s area of expertise.
Adopting a cautious view
We have adjusted our ASP and launch assumptions for CapitaLand’s
residential developments, and we are conservatively marking its effective
stake in the Raffles City developments in China to the transacted value.
For FY09-10, we have revised our earnings forecast by -10.9% and
-7.4% respectively. Our new target price is $4.48 – based on a 10%
discount to FY09 RNAV versus parity previously – to account for the
increased risks in the challenging environments. Downgrade to HOLD.
