CapitaLand climbs the most since 1998 on restructuring news

The real estate group saw shares open nearly 21% higher a day after it announced an overhaul of its main businesses.

  • CapitaLand Ltd (SGX: C31) share price opened over 20% higher on Tuesday morning (23 March 2021), after a trading halt was lifted
  • The stock spike - the largest since 1998 - came after the group announced a proposed restructuring of its business
  • The property group is looking to establish a new real estate investment manager called CapitaLand Investment Manager (CLIM) as part of the revamp
  • CLIM will be listed on the SGX, while CapitaLand will be delisted, once the proposal is approved
  • Trade CapitaLand shares with an IG account

CapitaLand share price: what’s the update?

CapitaLand shares soared nearly 21% - the most since 1998, a day after the group announced it would be revamping its main businesses.

CapitaLand, its real estate investment trusts and associate businesses had requested for a trading halt on Monday (22 March 2021), prior to the announcement.

The counter resumed trading on Tuesday morning at S$3.99 a share - up 20.5% from the last traded price of S$3.31. It is the most traded counter of the day as of mid day, with nearly 60 million securities exchanging hands.

Share price has retreated slightly to S$3.72 as at 11:59 SGT, but is still up 12.7%.

RHB analyst: ‘high value-unlocking move’

CapitaLand, together with CLA Real Estate Holdings, announced a day earlier that it is planning to restructure its business and establish a new real estate investment manager (REIM).

The group is seeking to consolidate its investment management platforms, as well as its lodging business, into CapitaLand Investment Management, as part of the proposed restructuring.

CapitaLand hopes to ‘sharpen its business focus’ and ‘unlock substantial value’ for shareholders through this exercise.

The newly created REIM, which will possess assets under management of about S$115 billion - making it the largest REIM in Asia and third largest globally - is to be listed on the Singapore Exchange (SGX).

It will also place the real estate development business of the group under private ownership, to be fully held by CLA through the proposed privatisation of CapitaLand on completion of the scheme.

RHB analyst Vijay Natarajan views the restructuring as a ‘highly value-unlocking move’. That’s because the new entity will allow investors to retain exposure to fund management and the high-returns generating fee income business, while still ‘monetising investments in the more risky development business’, he wrote in a note.

However, he also expressed surprise at Monday's announcement, saying that the pace at which CapitaLand has been restructuring has been 'much faster than we expected'.

Bloomberg Intelligence real estate analyst Patrick Wong says the overhaul ‘can allow the new CapitaLand Investment Management to commit more fully to investment property and fund oversight’.

‘Profit from the development business, particularly for residential projects, could be bumpy due to policy risk in China, Singapore and other major markets,’ he added.

CapitaLand will be delisted upon the proposed restructuring’s approval. The whole process of delisting and listing could take place by the fourth quarter of this year, according to Chief Financial Officer Andrew Lim.

Shareholders to receive S$4.102 in cash and scrip

Under terms of the transaction, CapitaLand will distribute approximately 48% of CLIM shares to all shareholders in a one-for-one distribution scheme, excluding CLA’s eligible shareholders.

Eligible shareholders are expected to receive S$4.102 per share in cash and scrip for every one CapitaLand share they own. This is roughly 24% above the last traded price of CapitaLand (S$3.31 as of Friday close) and represents a premium of 27% to the one-month volume-weighted average price.

The cash consideration will not be reduced by the amount of the FY2020 final dividend after payment is made.

RHB's Natarajan said the implied offer price is 'fair' given the current market conditions, recommending that shareholders vote in favour of the proposal.

CapitaLand will continue to own a 52% interest upon listing of CLIM.

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