What is the news?

CapitaLand emerged as the top bidder for a residential site at Bishan Street 14 in a GLS tender. The site is adjacent to its current project Sky Habitat and has an allowable GFA of 592,211sf and could yield about 645 units. It is in close proximity to Bishan MRT Interchange, bus interchange and Junction 8. The tender price of $505.1mn translates to ~$$853psf. That is 3.06% higher than the second highest bidder, but 1.9% lower than the price ($869psf) that it tendered for Sky Habitat site in Feb 2011.

How do we view this?

We view that as a defensive move by CapitaLand to maintain the selling price of Sky Habitat. As of October, the Sky Habitat is about 141 units sold out of the total 509 units, selling price ranging from $1,435psf to $1,893psf based on data from URA. We estimate the breakeven price of the latest site could be around $1,200psf and eventual ASP could be around $1,500psf, providing margin of ~25%, and potentially add ~3.3cents to its RNAV.

Investment Actions?

We keep our RNAV of $4.18 pending further development detail of the site, but lower the discount to RNAV to 5% (previously 15%) as recent economic data points from China show signs of economy bottoming out. We believe CapitaLand’s well-diversified portfolio in China could benefit from the current tailwind. Fair value is thus increase from $3.55 to $3.97. Maintain Accumulate.

Source: PhillipCapital Research - 30 Nov 2012