CapitaLand
Sept 5 close: $4.11
Citi, Sept 4
ERODING Margins and Risk of Provisions. Reiterate 'sell', cutting RNAV and target price: We are cutting our RNAV by 10 per cent to S$4.90 to reflect:
# 10-20 per cent decline in prices for its residential projects in China;
# lower selling prices and higher construction costs in Singapore and potential provisions; and
# lower P/E multiple of 10 times for its assets under management (AUM) business. Given the fast-deteriorating environment and its low ROE, we have based our target price of S$3.90 on a 20 per cent discount to RNAV.
Cut selling prices for residential projects in China: Tony and Oscar, our HK/China property analysts, believe that the 'easy money' era has ended. The next 12 months will be a differentiating period for the China property market. In terms of regions, we believe that Bohai, Yangtze River Delta, and Chongqing would outperform, while areas like Guangdong, Beijing, Wuhan and Fujian would see further corrections. We expect a 20 per cent decline in Guangzhou in the next 12 months, 10-15 per cent in Chengdu, flat for central Shanghai.
Potential provisions of almost S$150 million for Singapore residential sites: CapitaLand bought several large sites costing almost S$1 billion (attributable) in 2007 near the peak of the cycle. We are particularly concerned about Farrer Court and Char Yong Garden, which we believe could potentially require provisions with break-even prices of S$1,350 per square foot (psf) and S$2,500 psf vs selling prices of S$1,200 psf and S$2,200 psf, based on our estimates.
Recent sale of investment properties in China: We reflect a total gain of S$346 million (12 cents per share) from both the injection of the four Raffles City projects and the sale of Capital Tower Beijing.
SELL-
Sept 5 close: $4.11
Citi, Sept 4
ERODING Margins and Risk of Provisions. Reiterate 'sell', cutting RNAV and target price: We are cutting our RNAV by 10 per cent to S$4.90 to reflect:
# 10-20 per cent decline in prices for its residential projects in China;
# lower selling prices and higher construction costs in Singapore and potential provisions; and
# lower P/E multiple of 10 times for its assets under management (AUM) business. Given the fast-deteriorating environment and its low ROE, we have based our target price of S$3.90 on a 20 per cent discount to RNAV.
Cut selling prices for residential projects in China: Tony and Oscar, our HK/China property analysts, believe that the 'easy money' era has ended. The next 12 months will be a differentiating period for the China property market. In terms of regions, we believe that Bohai, Yangtze River Delta, and Chongqing would outperform, while areas like Guangdong, Beijing, Wuhan and Fujian would see further corrections. We expect a 20 per cent decline in Guangzhou in the next 12 months, 10-15 per cent in Chengdu, flat for central Shanghai.
Potential provisions of almost S$150 million for Singapore residential sites: CapitaLand bought several large sites costing almost S$1 billion (attributable) in 2007 near the peak of the cycle. We are particularly concerned about Farrer Court and Char Yong Garden, which we believe could potentially require provisions with break-even prices of S$1,350 per square foot (psf) and S$2,500 psf vs selling prices of S$1,200 psf and S$2,200 psf, based on our estimates.
Recent sale of investment properties in China: We reflect a total gain of S$346 million (12 cents per share) from both the injection of the four Raffles City projects and the sale of Capital Tower Beijing.
SELL-
