CapitaLand recently announced that it has entered into a conditional agreement to wholly acquire a prime commercial site in the CBD of Ho Chi Minh City, Vietnam to develop a Grade A office tower. Located in district 1 of Ho Chi Minh City, the 0.6 ha site will have a GFA of 106k sqm and will be directly connected to a planned metro station which will link the CBD to the districts of Binh Thanh, 2 and 9.

We understand that construction at the site is expected to commence in 1Q17 and complete in 2020, which is around the same time the metro line is anticipated to begin operations. We like that the group continues to diversify its portfolio geographically with this acquisition, particularly given the strong outlook for office demand in Vietnam – one of the fastest growing economies in Southeast Asia.

With a US$500m fund set up in Nov16 to invest in commercial properties in Vietnam, we expect CAPL to further deepen its exposure in the country ahead. Maintain BUY on CapitaLand with an unchanged fair value estimate of S$3.68.

Source: OCBC Research - 19 Jan 2017