CONTRARY to expectations in some quarters of a warm market reception for CapitaMalls Asia (CMA) when it made its dual-listing debut in Hong Kong this week, the mall developer received a chilly autumn welcome.
The initial cool reception comes as no surprise for a variety of reasons, chief of which is that the stock of CMA – back in its primary exchange in Singapore – has for a long spell been caught in a rut after its listing back in November 2009. This is despite its seemingly sound fundamentals. Timing could be another reason, given that CMA’s Hong Kong debut came amid a fragile global market sentiment.
Some still hold firm to the belief that the stock is a diamond in the rough which takes patience for the shine to come through, while others have begun to look at it as a ‘lost cause’.
So does CMA’s price woes stem from ill-conceived perceptions or from the simple lack of good fundamentals? It could be a mixture of both.
Many retail investors wrongly benchmark CMA against a real estate investment trust (Reit). Consequently, when these investors compare the yield of CMA to the 5-7 per cent range of Singapore-listed retail Reits such as CapitaMall Trust and Frasers Centrepoint Trust, the stock pales in comparison and gets axed from the list of investment choices.
On the fundamental front, analysts say that, operationally, CMA’s net property income (NPI) yields have improved over the past few years, albeit at a slower-than-expected pace.
CIMB property analyst Donald Chua commented that CMA’s China malls portfolio is still relatively immature and has been hit by a series of start-up costs in the past few quarters. He also attributed the developer’s depressed valuations to a general rise in risk premiums attached to China, which constitutes a significant proportion of the group’s portfolio.
It also does not help that a major shareholder recently pared down stakes in the company, depressing prices further while adding to the already negative aura surrounding the stock.
On all those counts, it appears that CMA’s lack of favour with the investing public stems more from a fundamental background as opposed to a groundless perception.
Some even see CMA’s second listing in Hong Kong as a ‘last-ditch’ effort to gain traction from a new market after failing to do so on home ground. After all, CMA’s portfolio of malls has a significant exposure to China – something many local retail investors find hard to relate to as China-based assets are ‘out of sight, out of mind’, whereas Hong Kong-based investors may be better equipped to appreciate the geographical make-up of CMA’s portfolio, being closer to China.
The dual-listing move may also not have a real impact on the counter’s liquidity – for now at least – as CMA’s dual listing was done by way of introduction, which means that the company is simply transferring some existing shares from one exchange to another with no actual increase in shares.
Some analysts opine that the recent dual-listing exercise may have caused CMA’s stock to be spread out too thinly and argue that traction on the Hong Kong bourse is likely to be even poorer than in Singapore.
Putting all that aside, despite all the negative talk surrounding the counter, more than 80 per cent of analysts covering CMA post bullish ratings on the counter, according to Bloomberg consensus polls.
Borrowing confidence from that, there may be a rainbow after the rain for this potential late-bloomer in the future. Only time will tell whether the naysayers or the optimists have the last laugh.
Source: Business Times © Singapore Press Holdings Ltd.
Singapore Real Estate Highlights 
Posted on October 21, 2011
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