Restructuring CapitaLand: Ought to You Purchase CapitaLand Funding (9CI) ?, Cash Information

Real estate giant CapitaLand was once considered one of the most foolproof companies to invest in in Singapore. But then Covid-19 happened. Hands up, how many of you haven’t dared to review your stock portfolio since the pandemic started?

If you’ve been keeping CapitaLand stock or want to get your hands on some, now is the time to get your head out of the sand as the real estate giant is now reorganizing into two separate entities.

Disclaimer: This article provides information on CapitaLand’s share prices as well as the company’s recent performance trends. It is intended as a reader’s guide only, not financial advice. Please exercise your own discretion when making investment decisions.

What is CapitaLand?

Hanging out in a CapitaLand mall is the quintessential Singaporean pastime. CapitaLand is behind some of Singapore’s most iconic shopping malls including ION Orchard, Plaza Singapura, Jewel Changi Airport and Bugis Junction, as well as prominent malls at heart like JCube, Westgate and Junction 8.

The company has developed and currently owns over 80 shopping malls not only in Singapore but also in China, Japan, Malaysia and Cambodia.

With a strong market capitalization of around $ 15 billion, CapitaLand (C31) was one of Singapore’s largest real estate giants and was included in the Straits Times Index.

But all good things come to an end, and earlier this year CapitaLand announced that it was restructuring. Trading for the stock ceased on September 9, 2021 and was delisted the next day.

CapitaLand shareholders received 100 shares of the new CapitaLandInvest company (more on that later), $ 95.10 in cash and 15.15 units of CapitaLand Integrated Commercial Trust for very 100 CapitaLand shares they held, which is worth about 4.102 USD per share based on a valuation of. corresponds to CapitaLandInvest at USD 2,823.

Why has CapitaLand restructured?

Both real estate and retail have suffered a huge setback thanks to Covid-19. The pandemic was fatal to many of the companies that pay CapitaLand’s rents. In fact, the company recorded a net loss of $ 1.57 billion for fiscal 2020. Ouch!

So it’s an understatement to say that CapitaLand’s real estate is bleeding money to death in these dire economic times. That means it will be difficult for them to keep paying the hefty dividends that their shareholders have become accustomed to over the years.

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In order to maximize shareholder value, they have chosen to discontinue their real estate development branch while allowing investors to continue investing in their investment and accommodation platform activities which have more profit potential in the short term.

The proposed reorganization will split CapitaLand’s investment management platforms into two entities, only one of which will be listed on the SGX.

It will allow CapitaLand to privatize its real estate development business and separate it from that part of the business that remains public and tradable on SGX. This will allow shareholders to access short-term stocks without being burdened by the losses on the property development side.

What are the new CapitaLand units?

CapitaLand (formerly C31) is divided into the following units:

• CapitaLand Investment (9CI): This company is listed on the stock exchange. 9CI is primarily comprised of two activities – fund management and their property management platform. The latter generates revenue by collecting a fee from third parties, and the company is committed to expanding this line of business.
• CapitaLand Development: The other unit will include the real estate development business which will be privatized and therefore not available on SGX. This arm deals with large real estate projects, the profits of which may only be realized in the longer term.

The new CapitaLand Investment (9CI) stock debuted on the SGX on September 20, 2021 with an opening price of $ 2.95 per share and was the third most traded stock shortly after its debut. It has done well in the past few days despite the general slump in Asian equity markets amid fears of a collapse of China’s Evergrande.

It may be a new and slightly smaller version of the previous CapitaLand, but it’s still nothing to sneeze at. In fact, 9CI is one of the largest Real Estate Investment Managers (REIMs) in the world and the only SGX-listed REIM.

9CI’s management portfolio includes approximately $ 119 billion in real estate assets, 80 percent of which are in Asia. They also manage $ 83 billion worth of real estate funds held in six public REITs and business trusts and more than 20 private funds.

CapitaLand Investment (9CI) vs. CapitaLand REITs: What is the difference?

CapitaLand Investment (9CI) is interesting for private investors like you and me, but what is the difference to REITs like the CapitaLand Integrated Commercial Trust (also known as “the CapitaMalls REIT”)?

As already mentioned, 9CI is involved in 6 CapitaLand REITs. Let’s take a closer look:

When you invest in 9CI, you get some exposure to the six REITs mentioned above, as well as the 20+ private equity funds and whatever they want to add to their portfolio.

However, that does NOT make CapitaLand Investment a REIT or Super REIT. REITs essentially act as landlords and collect rent from tenants.

CapitaLand Investment, on the other hand, is a business entity. It is not the landlord of tenants and is not involved in the activities of the REITs; Instead, it “supports” the six REITs by injecting capital into them so they can grow.

Before considering investing, it is important to understand the difference between investing in a company like CapitaLand Investment and investing in a REIT. The two asset types differ theoretically and structurally.

Should you invest in CapitaLand Investment (9CI)?

CapitaLand shareholders have already had quite a bumpy ride in the past few years, and the challenges posed by Covid-19 could make the cracks in its armor even more noticeable. Restructuring CapitaLand could therefore be a good thing for investors.

Although the CapitaLand Investment is smaller than its previous incarnation as CapitaLand after the restructuring, it has a fairly diversified portfolio and will benefit from the global inflow of capital into Asia.

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Evergrande is at risk of default, but some commentators believe that this could actually be an opportunity as CapitaLand will be able to acquire undervalued properties. If the early days of 9CI are any sign of this, investors seem pretty bullish.

To invest in 9CI, you need an investment broker account that can be used to buy and sell Singapore stocks. You can compare commission fees for SGX trades on MoneySmart.

The minimum commission fees can vary widely, from $ 0.99 to $ 25 per trade. If you invest small amounts and / or trade frequently, it makes sense to go with a broker with low fees, such as:

This article was first published in MoneySmart.