Analysts have no qualms on CapitaLand’s proposed restructuring that will see the company’s property development business taken private, but its fund management and lodging businesses remain listed.
RHB Securities has reiterated its “buy” recommendation for the stock with a higher target price of $4.25 from $3.75 previously.
CGS-CIMB Research, too, has kept its “add” rating for the stock with a higher target price of $4.04 from $3.42 previously.
Meanwhile, OCBC Investment Research has retained its “buy” call for the stock with a fair value of $4.03.
SEE:CapitaLand's revamp paves way for Singapore developers to follow
Under the proposed restructuring, CapitaLand’s property development business will be housed under CapitaLand Development (CD), which will be privately held by CLA Real Estate Holdings, an indirect wholly owned subsidiary of Temasek.
On the other hand, CapitaLand’s fund management and lodging businesses will be placed under CapitaLand Investment Management (CLIM), which will be listed on the Singapore Exchange.
CapitaLand shareholders are expected to receive $4.102 per share in cash and scrip for each CapitaLand share they own.
RHB describes the proposed restructuring as a “highly value-unlocking” move.
“The implied offer price of $4.10 a share (0.95 times book value) is fair in our view considering current market conditions – we recommend unitholders to vote in favour,” RHB analyst Vijay Natarajan writes in a note dated March 23.
CGS-CIMB notes that CLIM would continue to benefit as part of the privatised CapitaLand ecosystem.
“We like the transaction as it sharpens the group’s focus and positions it as an asset-light and capital efficient business through CLIM as well as unlocks value for investors through the scheme, in our view,” CGS-CIMB analyst Lock Mun Yee writes in a March 22 report.
OCBC says the move will create a “cleaner” structure for CapitaLand.
The brokerage expects CLIM to fetch a higher valuation than the traditional property development business.
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Moreover, CLIM would be less susceptible to property cooling measures, which tend to be more targeted at the residential sector, it adds.
“Although the Covid-19 pandemic has impacted CapitaLand’s operations, we believe its strong balance sheet and diversified portfolio puts it in a better position to drive a recovery ahead, while capital recycling activities are also expected to resume in a more meaningful way,” the OCBC research team writes in a March 22 note.
As at 2.31 pm, CapitaLand was up 45 cents or 13.6% at $3.76 with 74.9 million shares changed hands.
