Daiwa: CapitaLand’s Holland Road bid could fuel the stock

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CapitaLand’s bid for the “two-envelope” Holland Road sale site won’t be won easily, but it could fuel sentiment on the stock, Daiwa said in a note on Tuesday.

The site is an important extension of the existing Holland Village area and it’s being put through a “rare” selection process called a “two-envelope” bid, Daiwa noted.

Design proposals of all 15 bids for the site will be evaluated by a committee — the first envelope — and only those meeting the urban design plans and other criteria will make it to the second envelope stage, which compares the prices bid for the site, with the highest price winning, Daiwa said.

“We reckon that the winning bid for the Holland Road site could be S$1 billion to S$1.1 billion, but the major challenge is to come up with a compelling design proposal to make it to the second stage,” Daiwa said. “The odds of [CapitaLand] winning seem slim (less than 50 percent), but a victory would be sweet.”

Daiwa estimated the project would only add S$0.06 to its net asset value (NAV) estimate for CapitaLand, but winning could still fuel investors’ sentiment positively.

The investment bank raised its earnings per share forecasts for 2018-19 by 4 percent to incorporate the Pearl Bank Apartments redevelopment, and raised its target price to S$4.10 from S$4.00. It kept an Outperform call.