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Investors’ Corner
Investors' Corner | 01 August 2008
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Price – $6.15 Target – $7.04

We have reduced our estimates and assumed flat prices in 2009 owing to the reduced S’pore residential price momentum and lower AustraLand earnings. Overall, CapitaLand’s (CL) earnings are lower about 6.1% in 2008 and 4.5% in 2009. Despite our downgrade, CL is attractive for offering diversified exposure across geographies and to the retail mall roll-out across Asia, particularly in PRC and in an entrenched serviced apartment sector. EBIT contribution from rental/fee based income is about 45% of the total, which is attractive. Core earnings CAGR is about 8% p.a. over the next 3 years. Its net gearing of 60%, which has room for another $3b before it hits 80%, should provide ample funds for acquisitions. We lower our RNAV for CL by 15.1% from $9.20 due to lower TPs for its listed entities and a lower multiple on its property AUM business. At this stage of the cycle, we are moving to a 10% discount to RNAV for our TP. Maintain OUTPERFORM. – Macquarie Research (25 Jul)

CapitaRetail China Trust
Price – $1.08 Target – $1.55

We expect CapitaRetail China (CRC) Trust to turn in double-digit returns for the next 3 years and is one of the best proxies for exposure to the PRC retail and retail property sector. YTD, CRC Trust has been sold down 50% and underperformed the JPMorgan S-REITs Index by 36.5%. The market cap weighted S-REIT sector dividend yield for FY08E and FY09E is 6.6% and 6.8% respectively, 320bps and 340bps above the 10-year govt bond yield; CRC Trust is at 7%/7.8% and 360bps/440bps respectively. The key point is its ability to grow through acquisitions with a competitive cost of capital, which we believe is in CapitaLand’s interest to provide by injecting retail properties to the trust at a sustainable yield. CRC Trust enjoys ROFR over 3 CapitaLand private retail property funds, CRC Devt Fund I&II and CRC Incubator Fund, which have managed assets of 47 malls worth $6.9b. 18 malls are also under MOUs, which could contribute to its future pipeline. OVERWEIGHT. – JPMorgan (26 Jul)

China Hongxing Sports
Price – $0.50 Target – $0.76

China Hongxing Sports (CHS) is down 30% over the past 3 mths on concerns of a slowdown in PRC and a fragmented sportswear market. But the fundamentals are intact as consumption remains relatively resilient and retail sales growth in PRC hit an all-time high in Jun-08. PRC should become the second-largest sportswear market in the world after the US by 2009 and Datamonitor expects PRC to show a sales CAGR of 26% over 2007-12F. CHS’ 1Q08 results, while within expectations, had lower sales growth and gross margins and thus, our sales forecast are cut by 6%/8% for FY08F/9F respectively. A P/E valuation is more apt given weak market conditions and we believe an FY09F P/E of 14x, the average for its HK peers, as reasonable. While S’pore listed PRC stocks tend to trade below their HK peers, we think a level P/E is fair as CHS bears a similar market cap and brand awareness to its HK peers. Our TP still implies a 51% upside. Maintain STRONG BUY. – Nomura (28 Jul)

Parkway Life REIT
Price – $1.12 Target – $1.73

Parkway Life REIT (PL) 2Q08 results were within expectations, with DPU of 1.66 cents. We note that 1H08 DPU of 3.29 cents is now 49% of our FY08 estimate. We updated our model to include the new Japan acquisitions and pushed back our future acquisition assumption to Dec-09. Management continues to target a $1.6b portfolio by end-09, which we believe is possible given the debt headroom and fragmented nature of Asia-Pacific healthcare. Post model, we lowered our DPU estimates for 2008-12 by an average 1%. PL’s portfolio continues to display operational resilience despite high inflation and weaker growth because of its defensive cash flows backed by full and long term occupancy and 97.5% leases with annual rent escalation tied to inflation. We lower our 1-year DCF price target based on a higher beta of 0.8, a market risk premium of 5%, and a risk-free rate of 3.4%. Maintain BUY. – UBS Investment (28 Jul)

China Hongxing Sports  -- -- --   
Business: Co is a cash company.

Insight: Aug-18, 1H18, Co became a cash company following t... Read More
CapitaLand  3.590 -0.04 -1.10%   
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
CapitaLand Retail China Trust  1.540 -0.010 -0.65%   
Business: Co is a real estate investment trust with a portfolio of retail real estate across China.

Insight: Apr-19, 1Q19 gross revenue increased 1.1% in SGD t... Read More
Parkway Life REIT  3.040 -0.02 -0.65%   
Business: Invs REIT specialising in healthcare ppties.

Insight: Jul-18, 1H18 gross revenue rose 2.3% to $55.9m lar... Read More

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