Maintain BUY, Target Price Raised to S$4.50

• We raise our target price to S$4.50, pegged to 18% discount to revalued net asset value (RNAV) of S$5.44. With the CAPITALAND (SGX:C31) and Ascendas-Singbridge (ASB) merger completed, 2020 will herald a new era of growth with a renewed focus in establishing dominance in key markets of Singapore and China while looking at opportunities to deploy capital in growth markets of India and Vietnam.
• Our Target Price implies a price/forward NAV of 1.0x, pegged to historical 5-year +1 standard deviation (SD).

Where We Differ: Ability to Drive Sustainable ROE

• We forecast CAPITALAND-ASB to be able to deliver a return on equity (ROE) of between > 9% over FY19-FY21F, driven by an efficient mix of;
  • higher proportion of recurring income derived from ASB’s higher-yielding properties,
  • projected continued asset revaluations on the back of higher operating incomes and,
  • projected gains on S$3bn of planned asset divestments annually.
• The group has been active in achieving those targets and see opportunities to continue delivering strong ROEs.

Asset Reconstitution Strategy at Work

• CAPITALAND’s management has shown fast execution on its asset recycling strategy and we believe that China, Japan and Singapore are on the cards in 2020. In terms of capital deployment, we remain excited on its prospects in India, Vietnam and China.
• In Singapore, CAPITALAND is relooking potential redevelopment opportunities for its assets within the Science Park, which we believe will be NAV-enhancing in the medium term.
• Click on view full report button below for complete analysis.

Valuation

• Our Target Price of S$4.50 is based on a 18% discount to our adjusted RNAV of S$5.44/share.

Source: DBS Research - 2 Jan 2020