Market analysts were generally positive on the company’s proposed restructuring
CapitaLand shares climbed 20 per cent on Tuesday, a day after the real estate behemoth announced a major restructuring plan to consolidate its fund management and lodging business into a new entity, and take its property development business private.
Market analysts were generally positive on the company’s proposed restructuring, with one describing it as “highly value-unlocking”.
The counter, which resumed trading on Tuesday after a one-day trading halt pending its announcement, soared more than 20 per cent, or S$0.68 ($0.51), to S$3.99 ($2.97) at the open.
It has since trimmed gains and was last nearly 13.3 per cent higher at S$3.75 ($2.80). Over 55 million shares exchanged hands in the morning trade, making it one of the most heavily traded by volume among the index securities.
The broader Straits Times Index inched up 0.32 per cent at 3,137.96.
The restructuring plans come after CapitaLand posted its first annual loss in nearly two decades last year amid the pandemic.
The proposal to split itself into two is meant to sharpen the group’s focus on strategic growth and create shareholder value, the company said.
The first entity, called CapitaLand Investment Management (CLIM), will house its stakes in its real estate investment trusts (REITs) and business trusts, selected unlisted funds it is currently managing along with its lodging business.
Set to be listed on the Singapore Exchange, CLIM is expected to be Asia’s largest real estate investment manager with assets under management worth S$115 billion ($85.72 billion).
It will be asset-light and capital efficient, as well as focusing on growth in fee income and funds under management, the company said.
Meanwhile, its real estate development business will be taken private and become part of CLA Real Estate Holdings, its largest shareholder. CLA is an indirect wholly owned unit of Temasek Holdings.
Being capital intensive and requiring longer gestation periods, this side of the business may “not (be) adequately appreciated by the public markets”, said CapitaLand group chief executive officer Lee Chee Koon in a news release announcing the plans on Monday.
With a privately held development business, we will be able to better ride property development cycles to optimise returns across asset classes and geographies, he added, noting that the privatised development entity will continue to develop projects as a key source of pipeline for CLIM.
Overall, the move to split into “two distinct entities” will fit into the company’s longer-term objective of becoming a “globally competitive real estate developer and asset manager”. It will also give the company flexibility to be able to “match the right level of capital to the business objectives”, said Mr Lee at a media and analyst briefing on Monday.
Under the deal, shareholders will receive an implied consideration of S$4.102 ($3.06) per share in cash and scrip, including a one-for-one equivalent stake in CLIM.
That is 24 per cent above the last traded price of CapitaLand and represents a premium of 27 per cent to the one-month volume-weighted average price.