SINGAPORE (Feb 20): CIMB Securities is reiterating its “add” recommendation on CapitaLand with an unchanged price target of $4.19, after the property developer’s recent announcement of some $620.1 million worth of acquisitions in Japan.
To recap, CapitaLand last Friday revealed it had acquired a portfolio of income-producing three office buildings and a mall, comprising two office buildings in Yokohama – Yokohama Blue Avenue and Sun Hamada; one office building in Tokyo – Kokugikan Front; and one shopping mall in Saitama – Seiyu & Sundrug.
The latest deal will strengthen the group’s foothold in Greater Tokyo while increasing its total asset size in Japan to about $2.5 billion, according to the group.
(See also: CapitaLand acquires 3 office buildings and a mall in Tokyo for $620.1 mil)
In a report last Friday, CIMB analysts Lock Mun Yee and Yeo Zhibin note that while they leave their earnings estimates and RNAV of $5.23 unchanged for now, a key potential re-rating catalyst would be the group’s continued reinvestment into new RNAV-accretive projects.
“The outlook for the Greater Tokyo office market is expected to remain positive, with vacancies expected to stay low over the next few years,” they add.
Religare Capital Markets analyst, Tata Goeyardi, highlights the stock as his top pick in the developer space, which he continues to prefer over Singapore REITs.
He views the latest acquisition as a “balancing act” from CapitaLand, given that the majority of revenues over the next few years will be driven by the group’s completion of projects in developing markets such as China and Vietnam.
“For this purpose, having a steady recurring income from developed market such as Japan, is perhaps not a bad thing,” opines Goeyardi, who also notes that the office buildings and shopping mall were bought at cap rates which were in line with recent market transactions.
“In addition, CAPL strives to maintain 75%/25% balance between recurring income/development income, which again, fits into this strategy.”
As at 12.13pm, shares of CapitaLand are trading 1.2% higher at $3.50.
