CapitaLand: GS expects CapitaLand to benefit from a potential easing of policy measures in Singapore in mid-2016.
Despite cyclical headwinds for the sector, house projects headline ROEs to reach 8-9% in 2016-18E (the highest since 2010) driven by sizable investment completions of $13.1b in 2016-18 (record $6.9b in 2016).
Moreover, valuations are compelling with CapitaLand trading at a 45% NAV discount (-1SD) while its Resi business implies an undemanding 0.4X-0.5X P/B.
Also, the risk to CAPL’s book from ABSD/QC charges is only 0.3%. In line with this and given the 38% upside potential to GS' unchanged TP of $4.27, house reiterates Buy and adds it to the Conviction List.
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