Following up from previous Sell call made on 11 June 2013. Capitaland has traded downwards on a weaker market and on fears of interest rate hike in the near future. Property developers and banks which are interest rate sensitive as sold down by quite a fair bit. Current support at 2.95 then 2.80 level. 2.95 support level was holding very well since Aug last year. A breakdown of this support can see it head lower to test 2.80. Resistance currently at 3.00 then 3.10. As long as 3.10 remains as resistance, bearish in the short term still. Those looking to enter can consider accumulating on dips near 2.80 support levels for rebound.
OCBC – 25TH JUNE 2013
CapitaLand Limited: Uncertainties creeping into
macro picture
We believe recent PMI and interbank liquidity datapoints
from China point to increasing macro uncertainties as
authorities attempt to engineer a more sustainable albeit
slower tempo of growth. This being so, we see heightened
downside risks for CAPL’s Chinese residential sales and
rental outlooks. In Singapore, increasing visibility of a QE
exit scenario have moved bond yields to recent highs and a
trend of rising mortgage rates would likely ensue from here,
in our view. Our judgment is that while rising rates alone
are unlikely to trigger dramatic residential price downside,
it would likely weigh on primary sales volumes ahead. We
lower our fair value estimate to S$3.77 but maintain a BUY
rating as we consider CAPL shares to be likely oversold at
this juncture at a 45% discount to RNAV. Note that 36% of
CAPL’s value is constituted by its stake in listed CapitaMalls
Asia (CMA) which has dipped only 8.2% YTD versus CAPL’s
whopping 19.5% correction. Moreover, we highlight that
CAPL continues to hold a strong balance sheet (S$5.4b
cash, 44% net gearing) which would buttress its businesses
through potential headwinds.
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