• Visit to selected key projects in Shanghai, Hangzhou and Suzhou reaffirms our positive stance on the outlook
• Deepening presence in Tier 1 and 2 cities in China through M&As and urban renewal projects to gain access to prime land
• Harnessing digital enablers across its business segments
• BUY, TP S$3.73 maintained
Positive on key developments in East China
We came away feeling positive after our recent visit to various key developments undertaken by CapitaLand in Shanghai, Hangzhou and Suzhou. With a combined development cost of c.RMB 25bn (CapitaLand’s effective stake of c.RMB 11.5bn), we believe that the execution and positioning of the various projects - Raffles City Hangzhou, Raffles City Changning, and Lu One in Shanghai, Suzhou City Mall remain on track and will be key drivers to higher ROE on completion from 2017 onwards.
Deepening presence in key Tier 1 and 2 cities
Management strategy is to deepen their focus in key Tier 1 and 2 cities, which continue to see increasing demand for real estate on the back of faster urbanization rate and infrastructure developments. Within China, the group intends to land-bank through M&As or urban renewal projects in order to gain access to prime land. The group also intends to be more capital efficient through shortening project development cycles, optimizing cost through group procurement and tapping onshore capital markets.
Harnessing digital enablers across its business segments
We are positive that the group is embracing digital enablers and harnessing valuable data analytics across its business segments. We see value from its CAPITASTAR rewards program which will enable CMA to deepen its knowledge on customer spending habits and trends, thus tailoring its marketing campaigns to increase customer stickiness, spending and traffic at their malls. The recent strategic tie-up between Ascott and Tujia is expected to widen its addressable market segment as well as to cross-sell its products across various online and offline platforms.
BUY, TP S$3.73
We remain positive on the group’s prospects post our site visit and expect to see incrementally stronger earnings as the group delivers successfully on the ongoing development projects. Maintain BUY! (Read Report)
Source : DBS Group Research