Brokers' take

CapitaLand | Buy Jan 8 close: S$3.72 Target price: S$4.20 RHB Research, Jan 8

WE are positive on CapitaLand's recent divestments of non-core retail assets in China and India. It results in a sharper portfolio with a focus on dominant malls in core Chinese city clusters (its presence is reduced to 22 cities from 36 cities). It also lowers the risk of retail exposure to Tier-3 cities where it lacks scale and faces oversupply concerns and unlocks capital from mature assets. The divestments are expected to be completed by Q2 18.

At the same time, the company has been expanding its presence through management contracts, which we believe is the right strategy. Building on an asset-light strategy, it has signed seven mall management contracts (six in China and one in Singapore). We expect the recurring income stream from the newly opened malls to more than offset the loss of income from recent divestments.