Brokers' take: CGS-CIMB, OCBC raise target prices for CapitaLand

CGS-CIMB is reiterating an "add" for CapitaLand with a higher target price of S$4.04, while OCBC is maintaining a "buy" and raising its fair value to S$4.03, according to their equity research reports.

The previous target prices for CapitaLand from both research teams were S$3.42 and S$3.79 respectively.

This comes after CapitaLand announced its proposed restructuring to consolidate its investment management and lodging platforms into CapitaLand Investment Management (CLIM), as well as the privatisation of its real estate business.

CGS-CIMB analyst Lock Mun Yee said that the implied consideration price for shareholders is attractive, at a significant 24-28 per cent premium to the current share price, with CapitaLand shareholders expected to receive an implied consideration of S$4.102 for every CapitaLand share.

Further, she highlighted that CLIM would have stakes in listed real estate investment trusts (Reits) and private funds valued at S$13.3 billion, as well as funds under management of S$77.6 billion.

Ms Lock noted that these factors "provide a stable, recurring income base while its full chain lodging management business with real estate assets under management of S$27.7 billion offers another growth driver".

"CLIM would continue to benefit as part of the privatised CapitaLand ecosystem with the latter's integrated suite of real estate capabilities, while the privatised development entity will be able to develop and incubate projects as a key source pipeline for CLIM," she said.

Meanwhile, OCBC Investment Research is also remaining generally positive about the proposed restructuring.

It sees positives from CapitaLand's restructuring exercise, including the generation of more recurring income streams as the new listco CLIM would comprise its fund management and lodging business.

"This means that CLIM would also be less susceptible to property cooling measures, in our view, which tend to be more targeted at the residential sector," the research house said.

The team also cited the expectation of CLIM ranking among the top three largest listed real estate investment managers globally and the largest in Asia, as well as the 23.9 per cent premium shareholders are expected to receive compared to Monday's closing price as reasons for remaining upbeat about CapitaLand's restructuring.

Jefferies' equity analyst Krishna Guha said that although developers and Reits have dominated the local property counters over the last two decades, other asset managers could potentially be joining them in the coming decade.

"While CLIM may lead the way, other developers may also think about listing their private and Reit fund management units," he said.

Lim & Tan Securities also noted that the deal makes sense both from a stock valuation perspective as well as from a business perspective, and is good for minority shareholders as well. As such, the stockbroking firm recommends shareholders to vote in favour of the scheme.

Shares of CapitaLand added S$0.44 or 13.29 per cent to S$3.75.