CapitaMalls’ US$1.8b IPO priced conservatively

Singapore’s CapitaLand will raise US$1.8 billion ($2.47 billion) through the IPO of its shopping malls unit, playing it safe on the pricing after some Asian IPOs faltered recently due to valuation concerns.

CapitaMalls Asia’s IPO has been priced at $2.12 a share, according to an issue prospectus, below the midpoint of an indicative range of $1.98-$2.39 a share.

The conservative pricing is aimed at ensuring the IPO trades well after it debuts on the stock market on Nov 25, said a source with direct knowledge of the deal.

“The book was very well covered from long-only investors,” said the source, adding U.S. and European investors participated heavily in the IPO. “This IPO could have been priced higher, but the aim was not to squeeze investors.”

The CapitaMalls IPO will be the biggest in the city-state in 16 years. It follows Maxis’s US$3.3 billion IPO in Malaysia, Southeast Asia’s biggest IPO ever, as Asian companies rush in to take advantage of recovering stock markets.

Asia has been a hotspot for IPOs this year led by multi-billion dollar deals in China, but some newly listed companies such as China Merchants Securities, Glorious Property Holdings and Australian department store chain Myer Holdings have had poor debuts, raising concerns about valuations.

CapitaLand is selling 1.165 billion shares, or 30%, in its wholly owned CapitalMalls Asia unit, which will raise $2.47 billion. This will be Singapore’s second-biggest IPO since Singapore Telecommunications raised $4 billion in 1993.

JPMorgan is the sole financial adviser, and issue manager with DBS. The two banks are also bookrunners with Deutsche Bank and Credit Suisse, according to the prospectus.

SPECIAL DIVIDEND?

CapitaMalls manages and has interests in 86 retail properties worth US$14.4 billion in Singapore, China, Malaysia, Japan and India. CapitaLand suspended its shares for trading early on Tuesday.

CapitaLand, which is 40% owned by Singapore wealth fund Temasek, may pay a dividend from the proceeds of the IPO and also use it to invest in residential and other projects such as hospitality, some analysts said.

“The spinoff would help raise capital for residential projects and accelerate growth in other businesses,” said an analyst at a European brokerage who covers CapitaLand, but declined to be identified because of company restrictions.

Macquarie Securities said in a research note on Monday CapitaLand could take advantage of a faster-than-expected recovery in Asia’s property market.

“This exercise (IPO) helps the group to recycle capital to fund future growth in China and Vietnam, its serviced apartment business and opportunities for residential land acquisitions where possible,” analysts Tuck Yin Soong and Elaine Cheong said in a note.

CapitaLand has said it wants China to account for 35-45% of its assets from 28% now, and is seeking to increase Vietnam’s share to 5-10% of assets.

Source : The Edge – 17 Nov 2009

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