CapitaLand

CapitaLand: Has placed out 115.7m Australand shares (20% stake) in a secondary placement exercise, priced at A$3.685 a piece, at the bottom of the indicative range of A$3.685 to $3.75, but broadly on par with Deutsche’s SOTP of A$3.73 for Australand. This reduces CapitaLand’s effective interest in Australand from 59.1% to 39.1%. The placement allows CapitaLand to maintain effective control of Australand, while crystallizing a significant proportion of its NAV at levels not dissimilar to the previous indicative takeover price. CapitaLand will receive ~$485.3m in proceeds, but will book a loss of ~$127.5m, mainly due to recognition of FX translation losses and hedging reserves, which offset the divestment gain of $8.8m, fair value gain of $26.6m on re-measurement of the remaining stake. No material impact to the group’s NTA as the losses were already accounted for in equity, but 9M13 EPS will be reduced from $0.166 to $0.13, assuming the placement was effected 1 Jan ’13. Assuming that the cash proceeds are used to pay down debt at an average cost of 4.65%, Deutsche estimates that the divestment will dilute FY14-15 core earnings by 2%. Still the house believes valuations for CapitaLand are attractive at a 36% discount to RNAV of $4.88, c.1 standard deviation below its long term average. CapitaLand has already divested c.$900m in assets year to date, and further NAV crystallization could help narrow this discount. CapitaLand remains as Deutsche’s top sector pick, maintain Buy.