CapitaLand to consolidate investment management platform

Its property development business will be placed under private ownership.

CapitaLand has proposed to restructure its business, consolidating its investment management platforms, including its lodging business, into CapitaLand Investment Management (CLIM) whilst placing its property development business under private ownership.

CLIM, which will be listed by introduction on the Singapore Exchange (SGX), is expected to be the largest real estate investment manager (REIM) in Asia and third largest globally, and to have assets under management (AUM) of about $115b.

Meanwhile, the group’s real estate development business undergoing privatisation will be fully held by Temasek subsidiary CLA Real Estate Holdings upon completion of the restructuring. It will develop and incubate projects as a key source of pipeline for CLIM, entrenching the mutually reinforcing ecosystem within the group.

CapitaLand Limited chairman Ng Kee Choe described the restructuring as a significant milestone in the group’s transformation.

“It will provide the impetus for us to further expand and scale up our asset and investment management, and lodging businesses whilst benefitting from the pipeline of projects from CapitaLand as part of the ecosystem. It will also extend our market leadership in the Asian real estate investment management business,” Ng said.

CLIM will be a fully integrated REIM with funds and property management capabilities across multiple asset classes and a spectrum of private and listed funds at its inception.

According to CapitaLand, the scheme will enable the group to put greater focus on the real estate investment management to drive higher capital productivity, efficiency and returns, whilst separating its capital intensive and longer-gestation real estate development business and assets.

“The overarching objective of the scheme is to sharpen the group’s focus and position it to be an asset-light and capital-efficient business through CLIM,” it said in a statement.

Under the scheme, eligible shareholders are expected to receive $4.10 per share in cash and scrip for every share they own. This represents a premium of 27% to the one-month volume-weighted average price.

CLA will hold around 52% stake in CLIM and will continue to develop projects for the investment manager. They will hold the remaining real estate development-related business and assets under CapitaLand with a pro forma net asset value of around $6.1b.

Positive outlook on restructuring

OCBC Investment Research (OIR) has given CapitaLand a “buy” recommendation and has raised its fair value from $3.79 to $4.03.

Although the COVID-19 pandemic has impacted CapitaLand’s operations, OIR analysts believe the group’s strong balance sheet and diversified portfolio puts it in a better position to drive a recovery ahead, whilst capital recycling activities are also expected to resume in a more meaningful way.

They also believe that the group’s sharpened focus and future growth trajectory warrants a tighter revalued net asset value (RNAV) discount.

Meanwhile, CGS-CIMB has reiterated its “add” rating to the group and has raised its target price to $4.04.

“We like the transaction as it sharpens the Group’s focus and positions it as an asset-light and capital efficient business through CLIM as well as unlocks value for investors through the scheme, in our view,” CGS-CIMB analyst Lock Mun Yee said.

Lock said that they have narrowed their assumed RNAV discount from 45% to 35%.