Capitamalls Asia Limited: Looking at a HK secondary listing

- Secondary listing in HK

- Exercise to establish new financing platform, could close valuation gap to peers

- Maintain Buy with TP of $2.51

Proposes secondary listing in HK.CMA is proposing a secondary listing in HK to complement its growth strategy in China. The rationale for the transaction is to - i) widen investor base in HK and China, ii) enhance CMA's research coverage, profile and liquidity, and iii) establish additional avenues of financing. There will not be an issue of new shares and shares listed on the HK Exchange will be fungible. Listing currency will be in HK$. However, no detail has been provided in terms of the amount of shares to be transferred over for the HK listing. An EGM will be convened on 21 Apr to seek shareholders' approval for the transaction.

Exercise to yield longer-term benefits. This is a positive move as it will broaden the company's future fund raising spectrum by establishing new platforms of financing. Apart from Singapore and Malaysia, China remains a key growth market and currently accounts for approximately 37% and 70% of CMA's portfolio property value and GFA respectively. About 38% of its China portfolio is operational and the remaining is expected to complete over the next few years. In addition, CMA plans to double the number of malls in China to 100 in 3-5 years.

Listing may highlight valuation gap between peers. Whilst dual listing exercises in the past 15 months showed mixed share price performances post-announcement, we believe that this secondary listing would be well-received and could narrow the valuation gap between CMA, at 1.2xP/BV and its nearest peer Hang Lung Properties at 1.3x P/BV in the medium term. We continue to see CMA as a major player in the retail real estate niche that offers leverage into the Pan Asian consumption growth story. We maintain our Buy call on CMA. The stock offers 42% upside to our TP of $2.51, premised on a 10% premium to RNAV. Key risk to our view lies in a longer than expected operational ramp up of its malls and slow deployment of its balance sheet capacity into new investments.

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