CapitaLand's Bishan tender is defensive: Citigroup

Stock Name: Capitaland
Company Name: CAPITALAND LIMITED

Research House: Citigroup

Price Call: HOLD

Target Price: 3.28

CapitaLand is “paying to prevent a sky-fall” with its winning bid for a Bishan Street residential site adjacent to its current Sky Habitat project, Citigroup says.

 

With CapitaLand selling only 28% of Sky Habitat’s units, or 141 out of 509, after being on the market seven months, the bid is likely a defensive move to lengthen Sky Habitat’s shelf life and prevent competing developers from under-cutting its price, especially as the new site is slightly closer to the MRT station.

 

Citigroup expects the new site’s design, timing and pricing to be closely watched; “Sky Habitat was designed by renowned architect Moshe Safdie, and developing another iconic project next door could serve to dilute the exclusivity of Sky Habitat and may further impede the already slow sell-through rate.”

 

But it notes developing a less-iconic project might affect the new project’s pricing ability. It expects Sky Habitat’s $1,600 psf average-selling-price may be a potential price ceiling. It rates CapitaLand Neutral with $3.28 target. The stock is up 1.1% at $3.54.