CapitaLand

CapitaLand: stock is +2.1% at $3.39, making a new 52 wk high. CIMB visited some of CapLand’s projects in west China last wk, and conducted ground checks on its assets in tier 2 cities (Chengdu and Chongqing) to see how the group is progressing. Notes sentiment in the mass-mid tier residential segment is improving. Unit sales at The Loft, Chengdu are seeing a recovery and are expected to show up in FY13-14 when units in Phase 2 are handed over to buyers, while all its units launched at Imperial Bay, Hangzhou were snapped up within two hours last mth. For retail, CIMB notes retail footfall in Tier 2 cities have improved marginally from a year ago but are still some way behind that of Tier 1 cities. But highlights the quality of assets in its Raffles City portfolio, in particular its Chao Tien Men project (Raffles City Chongqing) is in a great location. The house keeps at the stock at Outperform with TP $3.97, tips as its top pick, with catalyst being an earnings and book value resurgence in FY13-14. Adds, valuations are undemanding at 0.9x P/B and 33% discount to RNAV. In other news, we also note that CapitaLand plans to launch its first value housing project in China in the next few wks. This will eb the co’s maiden foray into the middle-income mass housing mkt and is expected to be the next driver of growth. The group is optimistic about sales for the project called The Lakeside in Wuhan, which will be priced from Rmb 7000 – 8000 /psm , affordable for young graduates who can’t afford to buy private housing. CapitaLand has two other similar projects in Shanghai and one in Guangzhou. They are expected to be released for sale latest by 1Q13. All 4 projects will total some 6,300 units. Also, CapitaLand’s serviced apt arm, The Ascott, told the Wall Street Journal of its plans to open 4,000 new apt units in China over the next 3 yrs, raising its total to 12,000 units. Ascott plans to expand in China’s first and second tier cities and is eyeing options in cities such as Chongqing. The Ascott notes that China’s recent economic slowdown hasn’t negatively impacted the unit, and it sees more opportunities with domestic travelers and with businesspeople needing short term housing during work projects. It plans to announce locations and sizes of the new projects in the next two months. Ascott currently accounts for 6% of CapitaLand’s China portfolio, and accounted for ~12% of CapitaLand’s overall $3.0b revenue in 2011.