Are CapitaLand shares worth buying now?

• CapitaLand (SGX: C31) shares hit S$4.07 per share on Tuesday (24 August)
• Its asset-light business CapitaLand Investment will start trading next month
• Asset divestments could provide near-term catalysts, said Citi analysts
• Keen to trade CapitaLand shares? Open an account with us to get started.

CapitaLand stock makes further gains

Singapore-listed property developer and investor CapitaLand’s (CAPL) stock ticked up by 0.3% to trade at S$4.07 as of 12:27 SGT on Tuesday. About 3.3 million shares changed hands by then.

As of Monday night, 11 analysts recommended ‘buy’ on CapitaLand shares, four rated ‘hold’, and none said to ‘sell’. Their average 12-month target price was S$4.42, Bloomberg data showed.

Bullish research teams included Macquarie with an ‘outperform’ call and S$4.95 target, and Morgan Stanley with an ‘overweight/attractive’ rating alongside a S$4.75 target. Credit Suisse, UOB and Morningstar were among those with ‘hold’ or ‘neutral’ recommendations.

New asset-light entity to be listed in mid-September

Once the court approves the group's proposed restructuring, CAPL shares will be suspended on 06 September 2021.

The new entity, CapitaLand Investment, will then be listed and start trading on 16 September 2021.

OCBC Investment Research noted that CapitaLand Investment would operate with an asset-light business model with a strong focus on recurring income streams.

Citi analyst Brandon Lee expects CapitaLand’s share price to stay firm ahead of the restructuring’s completion in mid-September.

Near-term catalysts for the stock include potential acquisitions of strategic platforms, asset divestments, and tangible growth of funds under management, said Lee, as he maintained ‘buy’ with a S$4.35 price target.

Citi’s research team also opined that the real estate group’s first-half results showed ‘encouraging signs of key drivers underpinning CapitaLand Investment’s operational performance’.

RHB analysts, naming CAPL one of their top ‘buy’ ideas with a S$4.40 target, expect the group’s investment portfolio to see an earnings boost from Singapore’s economic reopening and easing of restrictions.

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CapitaLand’s H1 2021 profit soars

Earlier this month, CapitaLand reported that its revenue improved 35% year-on-year to S$2.73 billion for H1 2021.

Profit after tax and minority interests (PATMI) surged more than 850% to S$922.2 million, from S$96.6 million a year ago, amid higher portfolio gains and lower revaluation loss. This was driven by nascent economic recovery of its two core markets, Singapore and China.

Funds under management for Q2 2021 grew 5% quarter-on-quarter to S$83 billion.

CapitaLand said it foresees an uneven pace of recovery across its geographies and sectors, due to the pandemic’s unpredictability and varied progress of global inoculation.

OCBC analysts, recommending ‘hold’ with a fair value of S$4.24, believe the group’s strong balance sheet and diversified portfolio puts it in a better position to drive a recovery, while capital recycling activities are likely to ‘resume in a more meaningful way’.

CGS-CIMB, reiterating ‘add’ and a S$4.04 target, said the robust fee income and increasing contributions from recurring sources, such as investment properties, should drive growth.