CapitaLand Shares Surge Most Since 1998 Following Overhaul

Capitaland Ltd. surged the most since 1998 in Singapore trading after unveiling a major overhaul that will see the nation’s biggest real estate firm split its main businesses.

The stock climbed as much as 21% on Tuesday morning after a trading halt was lifted. Under the revamp announced Monday, the company plans to create and list an investment management entity which will house operations including real estate investment trusts and lodging. The firm will privatize its property development arm since it contains “longer-gestation projects” that require more intensive capital.

CapitaLand’s attempt to sharpen its operations comes after it posted a record loss of S$1.57 billion ($1.2 billion) last year as the coronavirus pandemic triggered writedowns of some investment properties and residential projects.

The restructuring is a “highly value-unlocking move,” said Vijay Natarajan, an analyst at RHB Research Institute. The new entity will allow investors to retain exposure to fund management and fee income business that generates high returns, while “monetizing investments in the more risky development business,” he wrote in a note.

CapitaLand Shares Surge Most Since 1998 Following Overhaul

The stock traded at S$3.79 at 10:05 a.m. local time, the highest since January last year. Under the transaction if approved, investors will get S$4.102 per share in cash and scrip for every CapitaLand share they own, a 24% premium to its previous closing price.

The new entity, called CapitaLand Investment Management, will have assets under management of about S$115 billion, making it the largest real estate investment manager in Asia, and the third-biggest listed one globally, behind Brookfield Asset Management Inc. and Blackstone Group, the developer said.

What Bloomberg Intelligence Says:

“CapitaLand’s proposed restructuring, including placing the real estate development business in private hands, can allow the new CapitaLand Investment Management to commit more fully to investment property and fund oversight. Profit from the development business, particularly for residential projects, could be bumpy due to policy risk in China, Singapore and other major markets.”

--Patrick Wong, real estate analyst

Click here for the research

The move will position the company as an “asset-light and capital-efficient business,” Chief Executive Officer Lee Chee Koon said in a statement on Monday.

Lee will helm the new entity, and CapitaLand will be delisted upon the proposal’s approval. The delisting and listing may take place by the fourth quarter, Chief Financial Officer Andrew Lim said.

Meanwhile, the real estate development business will be fully held by CLA Real Estate Holdings, an indirect wholly owned unit of Temasek Holdings Pte, which has a 52% stake in CapitaLand. By being privately held, the company “can make more appropriate risk-return decisions to undertake attractive but longer-gestation projects,” Lee said.

©2021 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.