CapitaLand upgraded to Buy by Daiwa, saying shares are ‘extremely’ undervalued

Singapore two-dollar bills

Daiwa upgraded CapitaLand to Buy from Outperform, saying the shares look “extremely undervalued” compared with the property developer’s positive deal flow and share buyback activity.

“Since the cooling measures, it has been business as usual,” Daiwa said in the note on Monday, adding that the stock has been “relatively resilient” since Singapore’s government introduced the fresh measures to tamp down the property market.

CapitaLand has announced S$3.1 billion of asset divestments and S$1.8 billion of asset-related investments in the first half of the year, Daiwa noted. The developer has also secured two residential sites in Guangzhou, China, for 2.08 billion yuan (S$409 million) on 14 August and its 50:50 joint venture won the concept and price revenue tender for a commercial and residential site in Sengkang Central, Singapore, for S$777 million on 16 August, it noted.

Additionally, the developer has been actively buying back shares, buying 86.7 million shares for S$312 million in the first half of the year, it noted.

“With negligible Singapore residential development risk, due to its still-minor exposure after acquiring Pearl Bank apartments (scheduled for fourth quarter of 2018) and 50% of Sengkang Central, we expect CapitaLand to remain immune to any adverse developments in the Singapore residential sector,” Daiwa said. “However, relative to its Singapore peer group, we see some risk from CapitaLand’s China exposure as it represents 37 percent of total assets.”

It noted China’s property cooling measures have led to a 67 percent on-year decline in residential units sold and a 43 percent fall in sales value in the first half.

Daiwa kept its target price on CapitaLand shares unchanged at S$4.10.

The stock was down 0.58 percent at S$3.43 at 9:33 A.M. SGT.

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