CapmallsAsia, SGX

CapitaMalls Asia recently announced 3Q net profit at $68m (+14.0% yoy but -39.8% qoq) on 22% drop in revenue to $42.5m (-41.8% qoq). OCBC Sec notes weaker results due to divestment of Clarke Quay & 3 M’sian malls to its Reits. Highlights joint bid for Bedok site with parent CapitaLand marks CMA's 1st investment in Spore post-IPO. Some houses like CMA's retail expertise, large cash balance of $1.4b & significant debt headroom (no net gearing), which will fit its plans to invest $800m-1b in new projects in Spore, China, M’sia.
Management expects to complete 3 more malls in China in 4Q10. Stock is trading at close to support at $2.13.

Houses Target Price
OCBC 2.40 (under review)
Daiwa 2.65 (under review)
JPM 2.60
Deutsche 2.53
Normura 2.20


Different houses have very different views on SGX.
At the moment, It is still uncertain if the deal would go through. If the deal is off, the current price of SGX now would be very attractive to the fund managers and investors. If the deal is through, we may see more selling pressure as the price to pay for ASX is very high.
Technical indicators suggests the selling pressure is still on. Support for SGX would be it's resistance at $8.45.

Short Term
SGX is facing selling pressure due to the high investment cost of ASX. ASX receive A$22 in cash per share and 3.473 SGX shares for each ASX share. This is a 37% premium to the traded price before the announcement. SGX will shift from net cash position to a net *gearing(see below for definition) of 45%. This may even result in equity raising exercises which may deter investors from being vested.

Long Term
Since stock exchanges relies greatly on the volume and liquidity, the merger would have a positive effect in the long run. The merger will result in an additional 2000 over listed companies and more financial products.
These few days, we see a lot of reports from various houses on their views on SGX. To summarize, these are the target prices of the various banks and research houses.

Kim Eng TP of 8.33
DBS TP$11.40
Credit Suisse: $7.50
CIMB $8.21
DMG $8.33
OCBC $8.97
CLSA: $9.00
J.P. Morgan $7.40
Citibank $10.50
Deutsche Bank $8.55