CMA

Published September 30, 2011

CMA takes 50% stake in Suzhou project It will join a Chinese developer to build a shopping mall and two office towers By UMA SHANKARI CAPITAMALLS Asia (CMA) will join a government- owned Chinese developer to build a shopping mall and two office towers within Suzhou Industrial Park, it said yesterday. Based on its 50 per cent share, CMA is expected to invest about 3.37 billion yuan (S$637 million) in the project. Including land cost, the total development cost of the project is expected to be about 6.74 billion yuan. CMA will partner Suzhou Industrial Park Jinji Lake Urban Development Co. The company, which is owned by the Suzhou Industrial Park government, is the master developer of the central business district within the park. The seven-storey shopping mall, which will be Suzhou's largest, will have a total gross floor area (GFA) of about 2.7 million square feet, while the two 20-storey office towers will have total GFA of about 646,000 sq ft. The retail portion will therefore account for about 81 per cent of the development's total GFA. This project is CMA's first development in Suzhou, said chief executive Lim Beng Chee. 'This development will leverage on our existing strong presence and management team in Shanghai as well as the larger East region of China, increasing our portfolio there from 11 malls to 12 - including six in Shanghai,' Mr Lim said. The development, which will be surrounded by offices, hotels and high-end residential apartments, will serve an immediate catchment population of about 700,000 in the Suzhou Industrial Park, CMA said. Analysts were generally positive on the deal and noted that with this acquisition, CMA has surpassed its $2 billion acquisition target for the year. 'We are generally positive, however, earnings will be only visible in four years time,' said Credit Suisse analyst Tricia Song. She added that CMA's current price-to-book ratio is 0.8 and the company's recently increased stakes in two malls in Shanghai will boost its earnings from China by early 2012, which would provide a catalyst. Credit Suisse has an 'outperform' call with a target price of $1.78 on CMA. OCBC Investment Research analyst Eli Lee likewise views the acquisition favourably because of the site's 'strong location and reasonable pricing'. 'We reiterate our thesis that possible capital recycling lies ahead and that the market has overly discounted CMA's price for a crisis scenario,' he said. OCBC Investment Research has a 'buy' call and a fair value estimate of $1.67 on the stock. CMA lost 0.5 cent to close at $1.20 yesterday.

BT
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My Thots....

SIP is now at the phase where it needs a mixed development to capture the 700K catchment.
Directly connected to Metro Line 1

Cost of development including acquisition of land, approx.  RMB 22K/sqm.

News of the Dual Listing will give an uplift.
http://info.sgx.com/webcoranncatth.nsf/VwAttachments/Att_A103C4801F2642C34825791A007F2301/$file/04NewsRelease_CMAHKListing_20110930.pdf?openelement

Recent cash hoard  about fully deployed,  more capital recycling in the line?

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DBS Vickers Report
http://www.remisiers.org/cms_images/research/Sep26-Sep30_2011/cma-290911flash_buy_DBSV.pdf

Management targets to achieve a project IRR of 11-13%  

The entire development is expected to cost RMB6,740m (S$1,275m), of which CMA's share will be RMB3,370m (S$637m).
This translates to cRMB21,742 psm of GFA.
We believe this is an attractive investment given the large population base and high GDP per capita of Suzhou, which is 2.5x that of Shanghai. Retail sales have been growing by c.17% y-o-y. and the development cost will be spread progressively over the next 4 years.
Meanwhile, gearing is expected to head up slightly to over 20% by end of the year.