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*Update* CapitaLand Ups Offer Price For CMA, 3 Things You Should Know
Tradeable, Tradeable Ideas | 16 May 2014
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By: Simeon Ang
Articles (125) Profile

**Update (16 May 2014, 11am): CapitaLand increased its bid for CapitaMall Asia to $2.35 per share. This represents an increase of 5.86 percent on its previous offer and 15 May 2014 close of $2.22. Read on as we find out whether the offer is worth it for both investors and CapitaLand.

  1. CapitaLand’s bid to take CapitaMalls Asia is seen by many as a positive as the property developer hopes to streamline operations and build greater cooperation between the two entities.
  2. CapitaLand would, if the deal succeeds, allow investors to gain exposure to a unique blend of properties; residential, commercial, and retail sectors.
  3. The deal, if successful, will boost CapitaLand’s financial report card in the upcoming quarters.

It’s not everyday you get a multi billion dollar acquisition deal, at least not in Singapore. So you can imagine how various media outlets have gone amok when CapitaLand announced it was going to purchase the rest of its mall unit for about S$3.06 billion.

Southeast Asia’s biggest developer offered to buy out minority shareholders (that’s you and me) of CapitaMalls Asia at S$2.22 a share on 14 April 2014. CapitaLand already owns about 65.3 percent of CapitaMalls Asia.

Why So Bullish?


As seen above, most analysts seem to agree that the multi billion dollar deal is a positive one. Essentially, the market also agrees as you can see in the chart of CapitaLand below.


Source: FactSet

Before heading in and snapping some CapitaLand stock, you might want to consider why have analysts and possibly, the market, rewarded CapitaLand for its latest acquisition.

Here is basically a condensed list of three points with regards to the positive factors from this acquisition:

  • Streamlines the group’s operations and focuses its resources

Suddenly, CapitaLand and CapitaMalls Asia will not have to compete for resources on an entity level. Resources across both entities can now be focused single mindedly on attaining the highest overall project returns on property developments. (No more, this is my property and you can’t touch it because I was here first!)

  • Offers investors a one stop shop in gaining exposure to property development

In the past, if you wanted to gain exposure to property development, you had to choose between CapitaLand (which focused on residential and commercial property development), and CapitaMalls Asia (which focused on retail property development).

If the deal succeeds, investors like you and I need only invest in one counter (CapitaLand) to gain exposure to EVERYTHING! Hoseh ah!

  • Boost CapitaLand’s financial report card

This goes without saying, any deal has to boost the company’s upcoming financial report card for it to be viewed as a positive by BOTH the market and analysts. Why? Because analysts are generally long-term looking, while the market is only ever going to give the company one quarter to prove its worth.


Source: CapitaLand

Good Use of Australand Proceeds
After the recent sale of its stake in Australand for about S$1.5 billion, the acquisition can be viewed as straightforward and the “lowest fruit to pick”.

In addition, as an investor, you would also like to note that CapitaLand’s bid to take CapitaMalls Asia private is but another gear rolling into place as CapitaLand seeks to focus its resources in Singapore as well as in China.

Of course, all these can happen only if the deal succeeds. And like the proverbial house of cards, all will come to naught if the final link (sufficient acceptances) does not materialise.

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Simeon, an LSE graduate, is currently the editor of Aspire. He specialises on topics surrounding trading psychology, politics and macroeconomics.

Please click here for more information about this author.

CapitaLand  3.490 -0.04 -1.13%   
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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