Conservative pricing aimed at ensuring it trades well after market debut

CAPITALAND will raise up to $2.8 billion from selling 34.5 per cent of its retail arm CapitaMalls Asia (CMA), which has a portfolio of 86 malls in Singapore, China, Malaysia, Japan and India.

The property group said that it will sell up to about 1.34 billion shares – including 174.78 million over-allotment shares – in CMA at $2.12 apiece in an initial public offering (IPO). This is below the mid-point of an indicative range of $1.98 and $2.39 stated in an e-mail sent to potential investors earlier this month.

The conservative pricing is aimed at ensuring that the IPO trades well after it debuts on the stock market on Nov 25, analysts said.

‘We have to leave some value for shareholders who subscribe to CMA,’ said CapitaLand chief executive Liew Mun Leong.

The IPO will be Singapore’s second biggest since Singapore Telecommunications raised more than $4 billion in 1993.

The $2.12 offer price values CMA, which has a net asset value of $5.3 billion, at about $8.2 billion – or at a price-to-book value of 1.55 times. The offer comprises a placement tranche of 1.059 billion shares, a public offer of 106.7 million shares and an over-allotment option of up to 174.78 million shares.

CapitaLand, on its part, could record a one-time gain of $883 million from the IPO. Part of the proceeds will be paid out as a special dividend to the group’s shareholders.

The company will also use some of its proceeds to invest in its residential and service residence business unit. Mr Liew said that he is looking at Singapore, China, Australia and Vietnam for growth for the overall group.

Mr Liew, who will also be the chairman of CMA, said that the company has received strong demand from institutional investors, particularly from the United States and Europe, for the IPO.

‘Investors understand that investing in CapitaMalls Asia allows them to participate in the significant growth of the shopping mall sector and the strong Asia consumer trends,’ he said.

Analysts agreed. Brandon Lee, an analyst at DMG & Partners Securities, said that CMA should do well because it is a China consumer story, which is attractive to investors. More than half of all malls are in China, which is expected to provide the engine of growth for CMA.

CMA, in particular, is expected to benefit from the low interest rate environment as it gears up to expand and/or make acquisitions after listing. Assuming a net debt-to-equity ratio of 0.3-0.5 times, the new company has the potential to take on debt of about $1.6 billion to $2.6 billion after it is listed, its chief executive Lim Beng Chee said.

CapitaLand also said yesterday that it has injected the remaining $800 million of the net proceeds from its $1.84 billion rights issue into CMA. Following this injection, all the net proceeds of the rights issue from early this year have been fully disbursed, the company said.

CapitaLand lost 10 cents, or 2.4 per cent, to close at $4.13 yesterday.

Source : Business Times – 18 Nov 2009

PROPERTY giant CapitaLand is spinning off 30 per cent of its stake in CapitaMalls Asia (CMA) to raise about $2.4 billion, in one of the biggest listings staged here.

The initial public offering (IPO) of the huge Asian mall owner, developer and manager opens today.

Retail investors will be able to buy into the IPO with shares priced at $2.12 each. The offer closes at noon next Monday, with trading expected to start around next Wednesday.

The price – below the midpoint of an indicative range of $1.98 to $2.39 a share – translates to an implied price-to-book value of 1.55 times.

It is ‘rich enough to give CapitaLand a big windfall, but yet a fair price to investors’, said CapitaLand chief financial officer Olivier Lim.

CapitaLand could reap up to $883 million in pre-tax earnings after the offering, assuming its over-allotment is exercised in full. It may recommend a special dividend after the CMA listing, which still trails the SingTel float in 1993, which raised more than $4 billion.

The CMA listing involves 1.165 billion vendor shares being offered at $2.12 a piece. There are 106.65 million shares earmarked for the public – including 11.65 million reserved shares and the rest in placements.

CMA has a portfolio valued at $20.3 billion, with 86 retail properties spread from Singapore to 47 cities in China, Malaysia, Japan and India.

The bulk – 50 properties – is in China, including 18 under development.

CMA holds two retail real estate investment trusts (Reits) – CapitaMall Trust and CapitaRetail China Trust.

Mr Philip Lee of JPMorgan, the offering’s sole financial adviser, said institutional investors from the West are showing great interest.

‘It’s China and its consumerism,’ said Mr Lee, who is JPMorgan’s chief executive and head of investment banking in South-east Asia.

CapitaLand president and chief executive Liew Mun Leong, who also chairs CMA, stressed that the mall developer was not a Reit, but a growth company.

He said Asia’s retail scene was still very disorganised, with a lot of shopping done in wet markets, providing huge opportunity to mall developers.

In China, only 20 per cent of shopping is done in malls, while it is just 5 per cent in India, but 65 per cent in Singapore and 85 per cent in the United States, he added.

More than 50 per cent of CMA’s earnings before interest and tax comes from Singapore – where the firm has 17 properties, including a share of Ion Orchard.

‘But in three to four years’ time, China will contribute this amount or more,’ said CMA chief executive Lim Beng Chee.

The average valuation of the 32 completed malls in China is $201 per sq ft (psf), a fifth of the $1,052 psf price for the 16 completed malls in Singapore.

CMA has nine malls in India, a country that will continue to urbanise and grow. But Mr Liew said India was a slower market to develop because of the bureaucracy.

China is faster, he added.

DMG & Partners Securities investment analyst Brandon Lee said: ‘The potential of the China market is big, but CMA will be a mid- to long-term play over three to five years.’

CMA said its focus is on growth, so its dividend payout will be less than that for the two Reits that it holds, said Mr Lim.

‘We will be paying a token dividend because we will need a lot of capital to grow,’ he added.

If CMA’s over-allotment option is exercised in full, it would raise about $2.76 billion, giving it a market capitalisation of around $8.2 billion. CapitaLand’s stake in CMA would fall to about 66 per cent.

Separately, CapitaLand said it has injected $800 million from part of its rights issue proceeds into CMA.

CapitaLand shares closed down 10 cents yesterday at $4.13.

‘The potential of the China market is big, but CMA will be a mid-to long-term play over three to five years.’ – DMG & Partners Securities investment analyst Brandon Lee

Source : Straits Times – 18 Nov 2009

CapitaLand raised $2.47 billion selling shares in its CapitaMalls Asia unit in Singapore’s biggest initial public offering in at least a decade, said a person familiar with the matter.

Southeast Asia’s largest real estate developer sold 1.165 billion shares in CapitaMalls at $2.12 each, the person said, asking not to be identified before a company announcement. The shares were previously offered at $1.98 to $2.39 apiece.

The listing of CapitaMalls Asia will give investors access to a company that manages 86 retail properties across Asia, including China. The company’s net asset value is estimated at about $5.3 billion as of Sept. 30, according to a prospectus filed with Singapore’s central bank Nov 2.

The share sale is the largest IPO in the city-state since Singapore Telecommunications’s initial offering in 1993, which raised more than $4 billion, a record for the island.

CapitaMalls Asia’s portfolio includes the Ion Orchard shopping mall in Singapore, a project jointly developed with Hong Kong’s Sun Hung Kai Properties. The shopping centre, which opened in July, counts LVMH Moet Hennessy Louis Vuitton SA’s Louis Vuitton, and Fast Retailing Co.’s Uniqlo chain among its tenants.

CapitaLand said on Oct 5 it will retain majority control of the unit following the share sale and for the “foreseeable future”.

Source : The Edge – 17 Nov 2009