SINGAPORE (Aug 23): CapitaLand’s recent acquisitions in Singapore and China show continued efforts to recycle capital and rebalance its portfolio mix, say analysts.

Recently, CapitaLand acquired a Sengkang Central mixed-use site in partnership with City Developments with a winning bid of $777.8 million or $923.6 psf ppr.

<a href="https://www.theedgesingapore.com/capitaland-cdl-jv-secures-prime-site-sengkang-central-7778-mil" target="_blank">CapitaLand-CDL JV secures prime site in Sengkang Central for $777.8 mil</a>

The revised additional buyer’s stamp duty (ABSD) charges will not apply for this project as the tender closed on June 21 before the latest cooling measures.

<a href="https://www.theedgesingapore.com/singapore-raises-stamp-duty-rates-additional-property-purchases-cool-market" target="_blank">Singapore raises stamp duty rates on additional property purchases to cool market</a>

The mixed development site will have direct access to Buangkok MRT station and the future bus interchange.

In a Monday report, RHB Research analyst Vijay Natarajan estimates blended average selling price of $1,700 psf, translating into net margin of 13%, assuming 80:20 mix for residential/commercial components.

In addition, CapitaLand last week also announced the award of two prime residential sites in Guangzhou for RMB 2.05 billion ($409.3 million).

The sites can yield about 1,300 units and comes close on the heels of the Chongqing site acquisition in June.

RHB estimates high-teen margins for the redevelopment based on our ASP assumptions of RMB 27,000 psm.

“With expected handover of more than 8,000 units from 3Q18 (RMB 16.2 billion in value), the move is a timely replenishment of its landbank,” says Natarajan.

“We remain positive on the acquisition as we believe integrated developments are one of the core competencies of JV partners, considering past track records.”

Year to date, CapitaLand has divested about $3.1 billion worth of assets and made investments worth $2.6 billion, including the latest acquisitions.

Management noted during a recent briefing that it is in a good financial position to capitalise on any opportunities arising from the recent cooling measures.

Overall, CapitaLand aims to grow its total assets under management (AUM) to $100 billion by 2020, with a balanced asset mix from emerging and developed markets.

The group plans to receive 80% of its income from investment properties with development properties accounting for the rest.

About 3.5 million shares were repurchased over the past week. Year to date, RHB calculates it has bought back 86 million shares. The buybacks are NAV-accretive and should boost ROE, as shares were bought back at 10-25% discount to its book value.

CapitaLand remains large-cap top “buy” with target price fine-tuned to $4.00 from $3.95.

RHB included earnings contribution from the recent acquisitions into its model, resulting in 1% uplift in RNAV to $5.00.

“Our target price is pegged at 20% discount to RNAV to factor in policy risks and volatile global macroeconomic conditions,” says Natarajan.

As at 12.30pm, shares in CapitaLand are are up 3 cents at $3.37 or 12.5 times FY19 earnings.

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