Thursday, June 14, 2012

CapitaLand :Valuations close to 2008-09 lows, around levels where mgmt initiated share buybacks last Sept (CS)

CapitaLand
Price (08 Jun 12 , S$) 2.60
TP (prev. TP S$) 3.58 (3.58)
Est. pot. % chg. to TP 38
52-wk range (S$) 3.15 - 2.21
Maintain OUTPERFORM
Valuations close to 2008-09 lows, around levels where mgmt initiated share buybacks last Sept

● With China cutting interest rates last week and further policy easing likely, CS Asia Strategist Sakthi Siva reiterates her OVERWEIGHT call on real estate, with focus on stocks where P/B is close to 2008-09 lows (click here for her 8 June report). Within Singapore, she highlights CapitaLand – at 0.73x P/B, stock is about 15% above the 2008-09 lows (42% discount to RNAV).

● We also note that the current price is close to the levels where CAPL first initiated the share buyback program last Sept, which saw CAPL buying 25 mn shares (0.6% of total). CAPL has secured the mandate for another 2% buyback (85 mn shares) this year.

● CAPL’s share price has fallen some 13% in the last five weeks, likely due to its weaker-than-expected 1Q12 results, with PATMI at 17% of CS FY12E, mainly due to weak development profits. ● However, we expect earnings momentum to improve in the coming quarters driven by stronger contribution from CMA and better development profits with the completion of The Wharf in 3Q12. Maintain OUTPERFORM. Valuations, we think, remain attractive at 0.73x P/B, and re-rating of CMA (30% of asset) is the key catalyst.

Valuations look attractive with P/B close to 2008-09 lows
With China cutting interest rates last week and further policy easing likely (CS economists looking for further rate cuts next in India and Malaysia), and given that historically real estate tends to outperform in an easing environment, CS Asia Strategist Sakthi Siva reiterates her OVERWEIGHT call on real estate, with a focus on stocks where P/B is close to 2008-09 lows (click here for her 8 June report) which she believes to provide some valuation support. Among the Singapore property names, she highlights CapitaLand’s current P/B of 0.73x (42% discount to RNAV, close to 1x S.D below historical average), which is about 15% above the 2008-09 lows, versus CityDev’s P/B of 1.26x which is some 50% above its 2008-09 lows of 0.83x.

Share price close to levels of buyback program last Sept
Note that the current price is close to the levels where CAPL first initiated the share buyback program last Sept, which saw CAPL buying 25mn shares (0.6% of total) from 6 Sep-7 Oct 2011. CAPL has secured the mandate buyback another 2% (85mn shares) this year.

Recent price weakness likely due to weak 1Q12 results...
CAPL’s share price has fallen some 13% in the last five weeks, likely due to its weaker-than-expected 1Q12 results (see note here), with PATMI at 17% of CS FY12E mainly due to weak development profits.

…however, we expect earnings momentum to improve
We believe earnings momentum could likely improve in the coming quarters driven by stronger contribution from CMA and better development profits with the completion of The Wharf in 3Q12.


Source/Extract/Excerpts/来源/转贴/摘录: Credit Suisse
Publish date:12/06/12

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