SINGAPORE (July 5): Maybank Kim Eng Research is maintaining its “hold” call on property developer CapitaLand at an unchanged target price of $3.75, while noting that valuations appear fair following its strong rally in the year to date.
This follows the research team’s recent visit to three newly-completed integrated developments, two shopping malls, and one office building owned by CapitaLand, which are worth a combined RMB24.6 billion ($4.9 billion) and located in the Chinese cities of Wuhan, Shenzhen, Hangzhou and Shanghai.
In a Wednesday report, analyst Derrick Heng expounds on his observations of “clever designs” for retail components of the integrated developments, with connectivity designed to enhance traffic flow from other components.
“With an evolving business landscape, CapitaLand is experimenting with new retail concepts and has added more experiential offerings in its malls… Its pipeline of malls includes the six malls that were recently signed on management contracts, and where rights of first refusal (ROFRs) had been negotiated,” says Heng.
He expects development gains from the phased opening of such projects to provide a one-off lift to the group’s earnings this year, as well as add to its recurring income stream in the years beyond.
“Going forward, shareholder returns will be boosted as the share of projects under development looks set to fall by 3 percentage points (from 13%) as the mega integrated projects move beyond the capital intensive construction phase.”
With the completion of three major Raffles City projects in Hangzhou, Shenzhen and Shanghai, the analyst also highlights how 2017 is a banner year for the group.
“Building on the success of its Raffles City project in Singapore, CapitaLand has exported the Raffles City brand name to various cities in China. Its ability to execute complex integrated projects is a key differentiator with management guiding for better returns achieved in these projects,” says Heng.
Shares of CapitaLand closed 3 cents higher at $3.54 on Wednesday.
