Capitaland

Capitaland: Deutsche maintains Buy with $4.36 TP. House recently met CapitaLand’s mgt & discussions focused on its ongoing strategic review, new organizational structure and refocus on SG and China following the appointment of its new CEO. Plans are still fluid as mgt is targeting to complete its strategic review by mid-year; however core operations remain in a business-as-usual mode. Refocusing efforts and executing in core markets of SG and China, as Mgt believes that streamlining the corporate structure into two geographical SBU’s and CMA/Ascott will help optimize capital allocation and its resources, and improve efficiency. House note that co has been more active in land tenders, e.g. Ang Mo Kio residential site (2.5% below winning bid), and recent win in Bishan beside its Sky Habitat site (3% above second highest bid). Moreover, co has been more proactive in clearing inventory with 133 units sold in Nov. at D’Leedon following price cuts vs. 13 in Oct. (c.700 total sold). For China, CAPL stated that it is looking to deepen its presence, with a focus on 8 cities. Mgt note prices in China have firmed with 4Q sales industry sales strong. Even without cost rationalization and non-core asset divestments, house believe that ROE’s will improve into FY13-14 as the development pipeline starts to mature and capital recycling picks up. Faster NAV crystallization and an improving ROE trend should drive a tightening of NAV discounts. CapitaLand is currently trading at a 20% discount to our RNAV of $4.86 and 1.09x P/B.