CAPITALAND | BUY - OCBC 25 Jun 2013 UNCERTAINTIES CREEPING INTO MACRO PICTURE - More uncertainty for CN sales - Likely rising mortgage rates ahead - Lower FV to S$3.77 We believe recent PMI and interbank liquidity datapoints from China point to increasing macro uncertainties as authorities attempt to engineer a more sustainable albeit slower tempo of growth. This being so, we see heightened downside risks for CAPL’s Chinese residential sales and rental outlooks. In Singapore, increasing visibility of a QE exit scenario have moved bond yields to recent highs and a trend of rising mortgage rates would likely ensue from here, in our view. Our judgment is that while rising rates alone are unlikely to trigger dramatic residential price downside, it would likely weigh on primary sales volumes ahead. We lower our fair value estimate to S$3.77 but maintain a BUY rating as we consider CAPL shares to be likely oversold at this juncture at a 45% discount to RNAV. Note that 36% of CAPL’s value is constituted by its stake in listed CapitaMalls Asia (CMA) which has dipped only 8.2% YTD versus CAPL’s whopping 19.5% correction. Moreover, we highlight that CAPL continues to hold a strong balance sheet (S$5.4b cash, 44% net gearing) which would buttress its businesses through potential headwinds.
Posted on: Tue, 25 Jun 2013 02:27:41 +0000
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