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Analysts: CapitaLand’s Recent Acquisitions To Bring 16% Upside!
Aspire, Hot Picks | 03 July 2015
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By: Raymond Leung
Articles (142) Profile

Analysts' updates as at 03/07/2015

Over the past month, CapitaLand (CAPL) had made four acquisitions and disposed of some assets. CAPL is employing a scheme to recycle capital and invest in assets with higher yield.

The group’s active capital recycling strategy caught the attention of analysts who are optimistic about CAPL.

Acquisition Of Japanese Mall

Vivit Minami Funabashi (VMF), a shopping mall located in Funabashi city of Japan was acquired by CAPL for a total of JPY 3.05 billion, valued at about JPY 10.5 billion. The acquisition was made through its CMA Japan Trust fund.

VMF is considered to be an acquisition of fair value as the purchase consideration was included in the calculation, after accounting for the liabilities of the holding entity. This acquisition will assist CAPL in diversifying its geographical exposure as Singapore and China are the main markets for its retail mall sector.

Selling DBS China Square To DBS Group

CAPL sold its 30 percent stake in DBS China Square (DCS) to DBS Group for a cash amount of $150 million. DCS is the holding entity of PricewaterhouseCoopers (PWC) Building, which is located on Cross Street.

PWC is currently the anchor tenant and occupies 97 percent of the building, giving it the naming rights. It was last valued at $673 million, based on full occupancy of the property.

At the first glance, the transaction price appears to be undervalued as the price of $150 million will amount to $1,400 per square feet (psf). However, after including the underlying debts of DCS, the sales price will surge to $1,892 psf.

Divesting Assets To Ascott Residence Trust

Four serviced residences and three housing properties in Australia and Japan were proposed by CAPL to be divested to Ascott Residence Trust (ART) for a figure of $246 million.

CAPL is expected to book a net divestment gain of $27.7 million from this sale. This sale is subjected to the approval of ART’s unit holders at their Extra General Meeting and is expected to be completed by end of this month.

Getting Involved In Malaysian Property

CAPL also announced their acquisition of Danga Bay A2 Island in Iskandar, Johor, Malaysia. The group is expected to hold a 51 percent stake in this project along with Malaysia’ Iskandar Waterfront Holdings and Temasek Holdings.

The site will be used to house residential buildings, serviced residences, retail malls and offices and spans across 71.4 acres of land. CAPL reiterated that this is a long term project that will be completed in the next ten to 12 years, depending on market conditions.

Analysts’ Recommendations

Analysts from DBS Research favour CAPL for its active capital management strategy of recycling capital and deploying into higher yielding assets. They gave CAPL a “Buy” call and projected a target price of $4.11, a potential upside of 17.4 percent (based on last price of $3.50).

Trained in fund management, Raymond is familiar with shares and various investment vehicles.

Please click here for more information about this author.

CapitaLand  3.520 +0.01 +0.28%   
Business: Co develops, owns, and manages real estate properties. [FY18 Geographical] China (41.2%), S'pore (38.5%), Europe & others (18.6%), Vietnam & Others (1.7%).

Insight: Apr-19, 1Q19 revenue fell 23.8% while net profit d... Read More

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