Brokers' take

CAPITALAND announced a 1-for-2 renounceable rights issue to raise $1.8 billion, priced at $1.30 per rights share - a 54 per cent discount to the post-rights net tangible assets of $2.81 per share. The rationale includes pre-emptively boosting its balance sheet, allowing it to pursue growth opportunities. Its post-rights net gearing will be a very comfortable 0.28 times. 30 per cent-owned CMT has concurrently announced a 9-for-10 renounceable rights issue at a price of $0.82 to raise $1.23 billion. CapitaLand has committed to subscribe up to 60 per cent of the new units, totalling up to $739.2 million. Should that be the case, CapitaLand's net gearing would still remain a comfortable 0.36 times.

Following the rights issue, CapitaLand will be positioned even more strongly to build a base for the next stage of growth. We maintain our 'Buy' recommendation, with a post-rights target price of $3.06, based on a 10 per cent discount to revised net asset value (RNAV).

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