Friday, June 8, 2012

CapitaLand

CapitaLand: DMG recommends Trading Buy with TP $2.82, says near term weakness provides buying opportunity. Notes, with the current macro headwinds, CapitaLand as a relatively high beta stock (~1.3x) also corrected significantly by ~19% off its 2012 peak. Says, although longer term outlook remains uncertain, believes valuations at 0.7x P/B and 0.6x P/RNAV are attractive for a liquid blue chip stock. On the prospect of potential new REIT guidelines, the house believes the direct impact of any potential S-REIT sector shift to the internal REIT manager model through the loss of REIT mgt fee income would likely be relatively low (~6% of FY11 revenue). Also sees neutral impact on CapitaLand’s business model and value creation, given CapitaLand’s already aligned interest with REIT unitholders to offer its stable of REITs with attractive yield accretive acquisitions. This is to ensure the REIT platform continues as a viable exit option for its large scale assets.

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