Monday, June 25, 2012
CapitaLand: Liew Mun Leong announced Friday that he would not extend his term as CEO when it expires next yr, setting his retirement on 28 Jun ’13. Mr Liew, aged 66, would have served 17 yrs as Group President & CEO when his term ends. No successor has been named. StanChart expects the new CEO to be sourced internally, potentially either Lim Ming Yan, COO, or Olivier Lim, CIO. Believes the market sees both candidates to be of equal competence to the current CEO, with a preference for Ming Yan due to his strong property experience and knowledge of China. Olivier Lim, previously the CFO, is seen as stronger in capital mgt and financial engineering. Nomura says Liew’s retirement is not entirely unanticipated, given he had already served 2 extensions of his appt (a 3-yr extension from Jun ’08, and a further 2-yr extension from Jun ’11). Believes a yr’s notice would allow sufficient lead time for a smooth transition process, and does not expect a major reaction in stock price. Maintains Buy with TP $4.05. StanChart says impact to the stock is neutral to positive as the transition will be smooth and believes the market has had a poor perception of CAPL's mgt style in the last 5 yrs and would welcome a change. Believes this could also arouse hopes of restructuring that could reduce the conglomerate discount for the stock. The house maintains an Outperform rating with TP $3.40 set at 15% discount to RNAV. On the other hand, the departure of industry stalwarts like Liew, could signal deeper industry uncertainties down the road. We note that in early Jun, Wing Tai’s chairman commented on the potential housing oversupply in the horizon. In the case of SIA, when industry leader Chew Choon Seng announced his plans to leave in Jul ’10, the stock was traded at ~$15, and was range bound till the end of the year. Today, premium airlines face intense competition from their low cost competitors and high oil prices, and SIA’s share price trended down to the ~$10 level now.