Capitaland 01 (May 08 - May 10)

[millionairemind]

Well....I juz found out 2nite's YuanXiao moon will be the biggest in 52 years. They can't wait for 2morrow to announce this. It must be a case of 夜长梦多.

That's a GOOD ONE...

[Poles]

alway use ah gong $$$....i wonder "these related" if left on their own....if can still swim...or even just stay a float.

[LenaHuat]

I'm waiting for this ticker to be sub-$2 and a major change in top mgmt b4 picking it up.

Still waiting for the other shoe to drop

[millionairemind]

February 10, 2009, 7.33 am (Singapore time)

Merrill upgrades CapitaLand to 'buy'

SINGAPORE - Bank of America-Merrill Lynch has upgraded Southeast Asia's largest developer CapitaLand to 'buy' from 'underperform' following the firm's announcement of a one-for-two rights issue to raise $1.8 billion (US$1.2 billion).

Merrill also raised its price target to $3.15 from $2.27.

'We believe the cash raised provides CapitaLand with the financial flexibility to ride through challenging property markets, enhance market positioning and more significantly the ability to take advantage of opportunistic acquisitions,' Merrill wrote in a report.

CapitaLand on Monday reported an 88 per cent slump in quarterly profit. -- REUTERS

[winston]

TOL:-

Why is Capitaland going up today ?

1) Short-Covering ?
2) Investor buying becuz they think that the Rights is at such a good price ? ( Then why is Capitaland so "desperate" to sell at such a good price ? )..
3) Existing Investors supporting the share price ?

If you are currently not an investor, would you buy at this price ?

When would they turn-around ?

Why are they doing this Rights Issue ?

[millionairemind]

W - Just speculating.

They did a good job with the trading halt and rights annc. Unlike DBS who allowed their shares to resume trading after lunch and got hammered, Capland got it halted for the whole day.

Come next day, ML gave an upgrade and all is well..

[winston]

Still thinking about this one...

Why did they do a Rights Issue at a "deep" discount instead of pursuing other options eg. Corporate Bonds, Increasing their Lines of Credit etc ?

[ucypmas]

There's a guy who did a post on DBS' share price movements following their rights issue.

http://level13-analysis.blogspot.com/2009/01/price-movement-of-dbs-shares-over-past.html

As to why I think they are doing it - if you examine Capitaland and its subsidiaries' current financing arrangements, most were done via notes (or bonds) through various SPVs with funds being tapped from the open market (non-bank system).

The problem now is the credit markets are closed to most borrowers, with most existing papers trading at a big discount. If the existing Capitaland papers are already being discounted severely, what are the odds of them raising S$3 bil from the corporate bonds market without paying a punitive and discouragingly high rates of interest?

So they have to go the banks, but currently with the banks hoarding cash it is unlikely that they will find anyone with the balls to back a S$3 bil loan, and take the risk of syndicating it to other banks later. This is no longer the go-go 2005/6/7 when you have hundreds of billions sloshing around the globe.

So shareholders (i.e. Temasek i.e. Singapore taxpayers i.e. You) are currently the most competitive source of funds, with no strings attached other than having to live with a crap share price. So Capitaland is right in doing it when the going is still good.

[winston]

So they have to go the banks, but currently with the banks hoarding cash it is unlikely that they will find anyone with the balls to back a S$3 bil loan, and take the risk of syndicating it to other banks later.

This is Capitaland that we are talking about. A Temasek linked company. And if they cant borrow money (even at a high interest rates) then we all should go for an extended vacation for a few years....

And I still dont agree that they should dilute their EPS .

Hmm... maybe there will be no "E" for a while so it does not matter what happens to the EPS

[ucypmas]

I thought about it a bit more and perhaps I was wrong in concluding that they want to borrow more money, and could not get it from the banks.

In reality they could instead be facing some pressure to deleverage and boost their equity buffer, hence the call for capital. If not from a general rights offer now, then from a selective placement later. They have gone for a general rights issue for now as it takes the pressure off Temasek having to fund all S$3 bil on its own. But whichever the route, significant dilution to existing shareholders are assured.

Not that I am saying that shareholder dilution is the right thing to do. Capitaland may have looked at their commitments, the credit markets and their ability to raise funds going forward, and decided that perhaps they had better call for rights now while people are still willing to pony up the cash and the stock price is at a level where its still doable.

Not vested in this stock.