SINGAPORE (Aug 4): RHB is remaining “neutral” on CapitaLand with a target price of $3.90, after the real estate group’s 2Q17 results came in line with the research house’s estimates.
In a Friday report, analyst Vijay Natarajan says the group’s recurring income is set for a boost, with the planned opening of eight malls in 2017 as well as expansions via management contracts.
Three Raffles City Malls in China began operating recently with near-full occupancy rates, he adds, while CapitaMall Westage in Wuhan also opened in April with a committed occupancy rate of 93%, all of which Natarajan sys would lift recurring income from the group’s China segment.
The analyst also notes that the group has divested $2.4 billion worth of assets as well as deployed $2.04 billion as capital in the year to date (YTD).
“Key investments include new office and retail assets in Japan and the expansion of Ascott’s portfolio. Management noted that Greater Tokyo, Japan is a focus market for acquisition – with potential to double its assets under management to $5 billion. More acquisitions are expected in Vietnam, too, as it seeks a promising residential and commercial property segment,” he comments.
Lastly, Natarajan observes that the group’s serviced residence unit, The Ascott Limited, is growing rapidly with notable acquisitions including its 80% stake in Synergy Global Housing and an extra stake in Quest Apartment Hotels.
See: Ascott to invest $170 mil in Funan’s co-living component
He expects the new acquisitions to contribute an additional $25-30 million in annual fee income upon their stabilisation.
“Key re-rating catalysts are the setting up of more real estate private funds, opportunistic M&As and the relaxation of policy measures. The key downside risk would be a prolonged real estate slowdown in key operating markets,” adds Natarajan.
As at 11.35pm, shares of CapitaLand are trading 2.7% higher at $3.84.
