Is a $1.5b IPO on the cards?

Property giant CapitaLand is reorganising its retail properties by moving the assets to a new business unit, CapitaMalls Asia, and plans to float the unit on the Singapore Exchange.

After the reorganisation, CapitaLand Retail which manages the group’s shopping malls, will be renamed CapitaMalls Asia. CapitaLand’s retail real estate fund and real estate investment trust management businesses under CapitaMall Trust and CapitaRetail China Trust will also be transferred to the new entity. As a result, CapitaMalls Asia will have a portfolio of 86 retail properties worth $20.3 billion across five countries: Singapore, China, Malaysia, Japan and India, the developer said.

CapitaLand said yesterday at a press briefing that it has not decided on the timing or pricing of the initial public offering. The group’s chief financial officer Olivier Lim said at the briefing that the group would be “comfortable” with floating about 20 to 30 per cent of the total shareholdings. For example, a 30-per-cent share sale would raise about $1.57 billion if the shares were priced at book value, and gives CapitaMalls Asia a market capitalisation of $5.23 billion.

By creating a separate listed entity, the shopping mall business will have direct access to capital markets, Mr Lim said. The proposed listing will also increase CapitaLand’s financial capacity so that it can accelerate growth in its other business units.

Shareholders could see returns in the short term too, Mr Lim said. “Depending on the situation of our balance sheet and the amount of opportunities we see in our other businesses, we may consider recommending a special dividend.”

After the listing, Mr Lim said that CapitaLand will retain majority control of about 60 to 70 per cent of the shares in the “foreseeable future”.

Analysts said that while they had expected one of CapitaLand’s units to be raising capital from the market, many were surprised at CapitaLand’s move to carve out its retail arm so soon. Mr Lau Wei Chong, an AmFraser analyst, said he sees the announcement as a positive move and added that CapitaLand’s retail business is “still pretty resilient”. He expects the launch of the IPO by the first quarter of next year.

DMG Partners and Securities analyst Brandon Lee said that the listing of CapitaMalls Asia gives investors a chance to participate in the thriving consumer story in China. The bulk of CapitaMalls Asia’s portfolio – 32 out of the 86 properties – is in China.

CapitaMall Trust’s chief executive Lim Beng Chee has been appointed as the CEO of CapitaMalls Asia. Shares of CapitaLand, CMT, and CRCT, which were suspended yesterday, will resume trading today.

Source : Today – 6 Oct 2009