CapitaLand grabs 51% stake in Malaysian township project

It's a 71.4-acre site in Danga Bay.

According to OCBC Investment Research, CapitaLand (CAPL) is taking a 51% stake, alongside Iskandar Waterfront Sdn Bhd (40%) and Temasek (9%), in a JV to acquire and develop a 71.4 acre freehold site in A2 Island, Danga Bay in Johor Bahru (JB), Malaysia.

OCBC adds that this is the group’s first major Malaysian township development, which is envisioned to be a “premier waterfront residential community comprising high-rise and landed homes,” together with a “central waterfront hub with a marina, shopping mall, F&B outlet/restaurants,serviced residences, office and recreational facilities”. 

Here's more from OCBC:

Total GFA is anticipated to be ~11m sq ft, and the project would take place in phases over 10-12 years. On a 100% basis, total land cost is RM811m (S$324m), payable over 4.5 years, and its gross development value is estimated at RM8.1b (S$3.2b).

We expect the JV to finance this project with 50%-70% debt, in line with CapitaLand’s general practice, and believe the first series of launches would likely begin in FY15.

From our estimates, CAPL’s IRR for this project is likely in the low to mid teens, and this acquisition would accrete S$174m or S$0.04 per share to the group’s RNAV, using a WACC of 7.0%.  

We view this development to be a favorable one for CAPL and note the share price has reacted positively since initial headlines yesterday. In particular, this acquisition was in conjunction with the Prime Ministers of both Singapore and Malaysia announcing a high-speed railway between Singapore and Kuala Lumpur by 2020, and unveiling details of Marina One, another JV development located in Singapore involving entities from both countries.

All three events signal at warmer ties between both countries, ahead of Malaysian elections to be held later this year.