CapitaLand - Sell: Overvalued

Raising RNAV to S$2.93, target S$2.20 — We raise our RNAV from S$2.74 to S$2.93 to reflect: 1) higher clearing prices for residential prices; we expect the luxury segment to eventually fall by 10% rather than 20% assumed previously; and 2) higher residential prices for its China properties on higher clearing prices for its residential projects. We continue to ascribe a 25% discount in deriving our target as core earnings remain weak.

Launched The Wharf successfully — CapitaLand has launched and sold over 90% of The Wharf Residences at S$1,100-1,400psf. Limited projects for immediate launch — CapitaLand plans to launch Gillman Heights next, likely at the end of the year. There are a limited number of projects that CapitaLand can capitalize on given that it bought most of its landbank towards the later stages of the last cycle.

Stock looks expensive — The stock is trading at a hefty 33% premium to its estimated RNAV and a 09E P/B of 1.3x. On a P/E basis, it is also the most expensive property stock in our coverage, trading at over 50x FY09E and over 30x FY10E earnings. The stock is expensive compared to the market average P/E of 15x and its ROE is also relatively low at 2.4% compared to the market’s 10%.

Sponsored Links

Related Posts by Categories