Shares of CapitaMalls Asia will likely gain about 10 per cent on their debut on Wednesday, helped by strong demand from institutional investors keen to gain exposure to China’s fast-growing consumer market.
The listing is the latest in a string of share sales across Asia as companies look to take advantage of a rally that has lifted the region’s stocks by almost two-thirds this year.
Priced at 1.55 times book value, CapitaLand’s malls unit was valued above a sector average of 1-1.1 times book value, but sources involved in the IPO said orders from institutions far exceeded supply at the issue price of S$2.12 a share.
CapitaLand could have priced the IPO higher, CEO Liew Mun Leong said at an analyst briefing on Nov 17, but chose a lower price as the Singapore developer wanted to ensure a successful debut for CapitaMalls.
CapitaLand had earlier set an indicative range of S$1.98 to S$2.39 for CapitaMalls, which owns or manages 86 Asian shopping malls, including 50 in China. Most analysts expect the stock to trade near the top of the indicated pricing range on its debut.
CapitaLand, Southeast Asia’s biggest developer, sold about one-third of its shopping mall unit, raising US$1.8 billion in Singapore’s biggest IPO since SingTel listed in 1993.
DMG & Partners analyst Brandon Lee said CapitaMalls offered investors a chance to tap fast-growing consumer markets of Asia, including China, where retail sales rose 16.2 percent in October from a year ago.
‘CMA (CapitaMalls Asia) is a beneficiary of Asia’s unparalled consumer growth story, particularly China’s… The IPO price of S$2.12 appears undemanding versus our valuation range of S$2.42 to S$3.01,’ he said.
Besides increasing rents from its China malls as retail sales grow, CapitaMalls could also boost earnings by injecting some of its properties into real estate investment trusts (REITs), booking one-time gains while enjoying recurring income as it continues to manage the properties.
Mr Lee said he did not regard the CapitaMalls IPO as expensive, citing the average valuation of around 2.5 times for companies that own or manage retail properties such as Simon Property Group in the United States and Australia’s Lend Lease .
CapitaLand plans to use the funds raised to seek opportunities in Vietnam and expand its Ascott serviced residences business.
The firm, which will book a one-time gain of S$883 million (US$638 million) from the IPO, has also said it may pay shareholders a special dividend.
Source: Business Times, 24 Nov 2009