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Tradeable Idea Of The Week: CapitaLand & Raffles Medical Group
Tradeable Ideas is a new weekly column by Tradeable. This column focuses on locally listed companies or particular sectors that have attracted strong interest from analysts at various research houses. Tradeable Ideas is meant to serve as a springboard for investor’s interest in specific stocks or sectors in Singapore.
CapitaLand
In the past week, STI took a significant hit which erased all gains YTD (Year-To-Date) sending the Singapore market into correction. Among the STI constituents, property developers took a huge hit with CapitaLand being hit harder than most! CapitaLand fell more than 30 percent from its 2013 high of $4.03 achieved in February. This fall has allowed value to reemerge for the group as its Price/Book ratio returned to 0.84 from its long term value of 1.2. This means you get more bang for your buck.
In terms of recent corporate developments, CapitaLand managed to secure a 99-year leasehold landed residential site located at Coronation Road by placing the top bid of $366 million. The site located in District 10 near Farrer Road MRT station has been marked for the mixed development of semi-detached units as well as bungalows.
We expect high demand for the property due to the fact that there is limited supply of good landed property sites especially in premier areas like Coronation Road. According to UOB Kay Hian, the site should add a pretax profit of $95 million to the group. Based on calls from the street, CapitaLand is expected to appreciate by an average of 37.5 percent.
Source: FactSet, CapitaLand’s 1 month stock chart with 2 days moving average (Purple) and 19 days moving average (Orange) lines
While the fundamentals seem to support a decision to buy, our technical charts seem to suggest otherwise. However, our charts imply that CapitaLand seems to be coming off from its recent low of $2.97 achieved on 25 June 2013. Whether this is just a rebound will depend on trading activity going forward.
Raffles Medical Group
Analysts from various research houses have renewed their interest in Raffles Medical Group (RMG) following the failure of its application for the transformation of its 30 Bideford Road property into a medical centre. RMG has been sitting on a cash pile that was meant for the redevelopment of the property. Currently, RMG plans to sell the property and is expected to bring in extra profit for the group. The healthy cash position and the expectation of cash flows from the sale have been favoured by analysts.
The hazy condition in Singapore is also expected to bring in higher profits for RMG as the adverse weather is likely to bring in more patients due to respiratory illnesses. With medical clinics island wide, RMG is well positioned to take advantage of this situation.
In addition, RMG, a domestic private healthcare player with more than 95 percent of its revenue derived from Singapore, is actively seeking diversion through its expansion in China. Besides operating a medical centre in Shanghai, RMG is now looking be involved in an integrated international hospital development in Shenzhen.
The sale of the property and expansion of business in China is expected to bring in more value to investors of the group. In all, analysts from Maybank Kim Eng, CIMB and OCBC Research gave RMG “Buy” calls, with an average upside of 19.8 percent
Source: FactSet, RMG’s 1 month stock chart with 2 days moving average (Purple) and 19 days moving average (Orange) lines
From a technical standpoint however, RMG appears to have come off its lows of $2.90 experienced on 13 June 2013. However, the rebound has not been strong enough to advocate a technical buy call for now. According to Professor Chan Yan Chong’s prescribed moving average lines, convergence of the two days and 19 days moving average lines have not yet occurred.
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