SINGAPORE (July 4): CIMB says CapitaLand is on track to meeting its 8% ROE target by 2018.
In a Monday note, analyst Lock Mun Yee found robust leasing activities amid high takeup rates for the newly-opened CapitaLand properties in China.
“CapitaLand China properties have strong recurrent income generation with good longer-term visibility, in our view,” says Lock.
(See: CapitaLand’s Raffles City mixed developments in China come of age)
With 77% of its asset based made up of investment properties and generating a recurrent income stream, there is strong income visibility going forward, she adds.
Four of the eight integrated projects scheduled for completion across the region this year are operational amid high pre-commitment levels, in excess of 95%.
Not only are these projects larger in size than previously, they also incorporate richer offerings, with more than 20% of the space leased to new-to-market flagship and concept stores.
“This will deepen the group’s integrated development branding and competitive edge,” says Lock who expects earnings impact from these new properties to be felt from FY18F onwards.
In addition to development and leasing activities, CapitaLand is also growing its retail operating network through its asset-light platforms.
It has secured six retail management contracts with more than 200,000 sqm of GFA in China and Singapore.
(See also: CapitaLand clinches three new management contracts in China)
Not only will this enable the group to demonstrate its retail management expertise, it will also generate more fee income and build a potential pipeline of acquisition assets through a first right of refusal to purchase these properties.
“We maintain our Add call with an unchanged target price of $4.19, based on a 20% discount to RNAV,” says Lock.
Shares in CapitaLand are trading at $3.50.
