SINGAPORE (April 27): Shares of CapitaLand have climbed more than 23% year-to-date. But DBS Group Research says the property group’s share prices could be driven even higher by strong catalysts in the medium term.

DBS is keeping its “buy” recommendation on CapitaLand and raising its target price to S$4.33, from S$3.85 previously.

Following CapitaLand’s strong performance in 1Q, DBS lead analyst Derek Tan believes 2017 could be “a banner year for the group”.

“The group’s various business units are expected to deliver strongly in 2017,” says Tan in a Thursday report. “We are seeing an improvement across business divisions.”

CapitaLand on Wednesday posted 1Q earnings of S$386.8 million (RM1.2 billion), a 77.2% increase compared to a year ago.

Group revenue held steady at S$897.5 million, but EBIT grew 35% to S$618.6 million, while operating PATMI for the period increased by 121.1% to S$337.8 million.

The robust set of results were driven mainly by the sale of The Nassim and higher portfolio gains.

“[CapitaLand] will see higher valuations on the back of improved property market sentiment, which will translate into strong sales,” says Tan.

With the brighter outlook for residential sales in Singapore, Vietnam and China, Tan believes CapitaLand should become “more aggressive” in replenishing its land bank in these countries.

According to Tan, CapitaLand’s management is exploring opportunities to acquire land at a cheaper entry price through joint ventures or mergers & acquisitions.

“The group remains keen to build on its recurring income base and we could see acquisitions in that space,” says Tan. “In addition, opportunistic asset recycling of mature assets into its listed REITs/funds, or any M&A activities, present re-rating opportunities, going forward.”

As at 12.59pm, shares of CapitaLand are trading 2 Singaporean cents higher at S$3.74. —

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