Capitaland prices hold up better than expected post measures

● CAPL’s share price held up better than expected, falling only 4% in the first trading day after last Friday’s announcement of the seventh cooling measures. We believe this is likely because CAPL has only ~10% of exposure in the SG residential space.

● We estimate that if ASPs for SG residential fall by 10%, then its earnings impact would be some negative 6-8% in the next three years based on its unsold units and pipeline projects.

● FY12 results likely out towards the latter part of Feb-12. We have taken the opportunity to relook at our assumptions. Following our increase of CMA’s target price from S$2.14 to S$2.54, we have subsequently raised our target price for CAPL from S$3.96 to S$4.50 as we have also trimmed the discount to RNAV from 20% to 15%, which is now more in line with CAPL’s historical average.

● Maintain OUTPERFORM. We continue to like CAPL as we expect earnings momentum to improve in 2013 (driven by CMA and better residential profit recognition from both Singapore and China), while downside risk is supported by buybacks.

Share price held up better than expected post measures
CAPL’s share price held up better than expected, falling only
4% in the first trading day after last Friday’s announcement of the seventh cooling measures in Singapore. We believe this is likely because CAPL has more exposure overseas and in other property segments like commercial, while SG residential accounts for only ~10% of RNAV. We estimate that if ASPs for SG residential fall by 10%, then its earnings impact would be some negative 6-8% in the next three years based on its unsold units and pipeline projects.

Adjusting target price for CMA’s TP increase
 CAPL is likely reporting its FY12 results towards the latter part of Feb- 12. We have hence taken the opportunity to relook at our assumptions. Following our increase of CMA’s target price from S$2.14 to S$2.54, we have subsequently raised our target price for CAPL from S$3.96 to S$4.50 as we have also trimmed the discount to RNAV from 20% to 15%, which is now more in line with CAPL’s historical average.

Maintain OUTPERFORM
We continue to like CAPL as we expect earnings momentum to improve in 2013 (driven by CMA and better residential profit recognition from both Singapore and China), while downside risk is supported by buybacks. The stock is trading at 1.09x P/B, broadly in line with the historical average, although we highlight there is a potential upward re-rating when CAPL revalues its portfolio.