During China’s 2009 National People’s Congress Annual Sessions, the government pledged to stabilize the property market and promote a steady and orderly development. Other than building low-rent houses for poor families, few details were given on how the government would reform the broader urban housing system, which would impact on CapitaLand’s exposure in China. We expect more details and initiatives to be announced in the coming months.
CapitaLand has not made any provisions for its residential landbank. We think that its landbank is largely profitable, owing to the relatively low costs of acquisition and declining construction costs. However, we estimate that Urban Suites (former Char Yong Gardens), may have to be written down by about $44m, assuming an ASP of $2,000 psf.
Following the rights issue, CapitaLand is well ahead of its peers in terms of its cash horde of $6bn ($5.3bn if it takes up 60% of CMT rights). It also has access to another $3bn via undrawn short-term debt facilities and the unused portion of its Medium Term Note Programme. We believe that the management would be looking for distressed assets mainly in China.
We are lowering our ASP assumptions by up to 20%, thereby reducing our FY09 and FY10 forecasts by 4.1% and 10.5% respectively. We think that valuations are very attractive for this market leader and we reiterate our BUY recommendation with a target price of $2.70, pegged to a 15%-discount to RNAV.
Sponsored Links
No comments:
Post a Comment