Why did CapitaLand just hit an 11-year high?

The property developer saw its shares rise as much as 6.6%, following a new target price upgrade from RHB’s equity research team.

  • CapitaLand Ltd (SGX: C31) shares rose to an 11-year high of S$4.05 on Thursday (22 July 2021)
  • RHB analyst Vijay Natarajan lifted his firm’s target price on the stock to S$4.40 from S$4.25 a day earlier
  • Last week, the property developer received a conditional eligibility to list shares of its CapitaLand Investment - a new entity it had proposed - on the SGX-ST
  • Across the board, analysts foresee an 8% upside potential on the stock
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CapitaLand stock price: what’s the latest?

Capitaland shares rose as much as 6.6% this week, after RHB analysts raised their target price on the stock.

Analyst Vijay Natarajan lifted his firm’s target price to S$4.40 from S$4.25 previously, while keeping a ‘buy’ rating on the property developer.

He said that RHB is now more positive about CapitaLand’s proposed restructuring of its businesses into two separate entities, thanks to a new scheme document released on 17 July that outlined details of the exercise.

‘(CapitaLand’s) independent financial advisor Evercore has deemed the deal “fair and reasonable”, and our recommendation is also to vote in favour of the transaction,’ Natarajan added in a note dated 21 July.

The blue-chip counter is up by over 22% since the strategic restructuring and demerger was announced on 19 March.

The stock has a consensus rating of ‘outperform’ and target price of S$4.33 as of 23 July, based on the latest analyst sentiments published by SGX StockFacts. The target price equates to a potential 8% upside from its last traded price of S$4.01.

What do we know so far about the restructuring?

As part of the restructuring, CapitaLand’s real estate development arm will be parked under existing controlling shareholder CLA Real Estate Holdings as a private business, while its investment management and lodging business will be consolidated into a new company called CapitaLand Investment (CLI).

If the deal is approved, CLI will then be listed on the Singapore Exchange (SGX), replacing CapitaLand Ltd as the publicly traded entity.

For existing shareholders, the group has proposed an implied consideration of S$4.102 (comprising one CLI share worth S$2.823, a cash consideration of S$0.951 and S$0.328 worth of CapitaLand Integrated Commercial Trust units) for every one CapitaLand share held when the announcement was made.

This works out to be roughly 24% above the last traded price of S$3.31 pre-announcement, and around 28% above the 10-year volume-weighted average price.

Natarajan initially said that the implied consideration was ‘fair’, given the current market conditions.

CapitaLand said a capital reduction exercise will be conducted, before the distribution of approximately 48.24% of CLI shares to all shareholders in a one-for-one distribution scheme. This excludes CLA’s eligible shareholders.

Shareholders are expected to vote on the proposed deal during an extraordinary general and scheme meeting on 10 August.

The Singapore Exchange Securities Trading Limited (SGX-ST) also granted a conditional eligibility for the listing of CLI shares on its Main Board by way of an introduction on 16 July.

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