SINGAPORE (March 27): RHB is raising its target price of CapitaLand by 24 cents to $3.84 if reported talks to acquire Asia Square Tower 2 from Blackrock reaches a successful conclusion.
In a Monday report by RHB, analyst Vijay Natarajan says the acquisition would strengthen CapitaLand's recurring income base and position itself ahead of a potential rebound in Singapore’s office sector.
Media sources reported CapitaLand is currently in exclusive talks with BlackRock for the purchase of Asia Square Tower 2.
In 2Q16, Blackrock had sold Asia Square Tower 1 for $3.4 billion ($2,704 psf) to Qatar Investment Authority. While CapitaLand was initially in the running, it later pulled out.
Asia Square Tower 2 has about 750,000 sq ft of office space, 30,000 sq ft of retail space and a hotel component. The 308-room Westin Hotel was sold to Japan's Daisho Group for $468 million in late 2013.
Assuming a pricing range of $2,700-2,900 psf, the valuation of the remaining building would be $2.1-2.3 billion. If the acquisition is fully funded by debt, CapitaLand’s net gearing would increase to 0.46x from 0.41x.
The rumoured talks come at a time when sales of Singapore launches have picked up after increased marketing efforts and the residential segment in China is likely to see a slowdown from recent policy changes.
Recently, CapitaLand officially launched its 124-unit Marine Blue project. As at February, it has sold 38 units at ASP of $1,700 psf.
Sales across D’Leedon, Interlace and Sky Habitat have also picked up after the launch of its Stay-Then-Pay programme.
On the other hand, selected Chinese cities including Beijing, Guangzhou and Zhengzhou, recently announced new rounds of policy measures to ease property prices.
CapitaLand has about 8,430 units in the launch pipeline across China for 2017, mainly across tier-1 and tier-2 cities.
“With CapitaLand targeting the mid- to high-end residential segment, we expect sales to slowdown in the near term,” says Natarajan who is maintaining its "neutral" call on CapitaLand.
Shares of CapitaLand are down 2 cents at $3.67.
