CapLand retail unit spin-off may raise up to $2.78b

(Abstract from Business Times - 3rd Nov, 2009 by UMA SHANKARI)


~It could be S'pore's largest IPO since SingTel; pricing aggressive, but take-up may be healthy~


(SINGAPORE) CapitaLand is seeking up to $2.78 billion from the listing of its retail arm CapitaMalls Asia (CMA). Some 1.165 billion shares are being offered at $1.98 to $2.39 apiece, according to e-mails sent to potential investors seen by BT.
This means that CapitaLand could raise between $2.31 billion and $2.78 billion. The developer intends to float 30 per cent of CMA.
If the pricing is achieved, CMA's initial public offering (IPO) will be the largest so far this year. According to data tracked by Bloomberg, the 17 share sales in Singapore this year have raised an average $17.3 million.
In fact, if the offering is priced at the top end of the range, the share sale may well be the largest IPO in Singapore since SingTel's initial offering in 1993, which raised more than $4 billion - a record that has yet to be broken.
CMA's listing will give investors access to a company that manages 86 retail properties across Asia including Ion Orchard. The company's net asset value is estimated to be about $5.3 billion.
CMA's prospectus, which was filed with the Monetary Authority of Singapore yesterday, did not give details on the IPO's size and pricing. In response to media reports quoting the price range and number of shares being floated, CapitaLand reiterated late yesterday that its decision to proceed with the IPO (as well as the size and pricing) will be subject to 'investor demand and prevailing capital market conditions', among other things.
Analysts said that the IPO was pricey, but expected take-up to be strong despite that.
The IPO pricing values CMA at $7.69 billion to $9.28 billion. Using the estimated net asset value of $5.3 billion, this means that the IPO is being priced at 1.45 times to 1.75 times the book value.
'I know that it (CMA) is CapitaLand's crown jewel, but the pricing is very aggressive,' said an analyst with a foreign research house here.
But the CapitaLand 'franchise' is still a compelling story for investors, he added. The developer has sponsored and listed five property trusts since 2002, including the retail trusts CapitaMall Trust and CapitaRetail China Trust.
'Investors have seen CapitaLand's success in spinning off its property trusts, and fund managers wanting exposure to the China consumption story will be interested,' Najeeb Jarhom, an analyst at AmFraser Securities, told Bloomberg. More than half of CMA's malls are in China, which is expected to provide the engine of growth for the company.
Market watchers also expect CapitaLand to get strong support from its existing investors for CMA's listing.
CapitaLand has gained 15.3 per cent since it announced plans to list the retail unit on October 5. By contrast, the benchmark Straits Times Index has added 1.6 per cent over the same period. CapitaLand's stock gained 9 cents, or 2.2 per cent, to close at $4.23 yesterday.
CMA said in its prospectus that its strong financial position and capital structure will provide the company with the financial flexibility to fund its growth and expansion.
'These opportunities include acquisitions of land for greenfield projects, brownfield projects and completed malls, asset enhancement initiatives and other merger and acquisition opportunities in Asia,' the company said.
Investor roadshows, which began yesterday, will go on until Nov 16, according to the e-mails. Pricing for the offering is due on Nov 16.
The Singapore public offer period is between Nov 17 and Nov 23. Listing and trading will likely take place on Nov 25, according to the e-mails.
JPMorgan is the sole financial adviser for the listing, and is also the issue manager together with DBS Bank. The two banks are also bookrunners with Deutsche Bank and Credit Suisse.
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