Technical rally benefits CapitaLand and CDL

July 26, 2008
PLAY OF THE WEEK
Technical rally benefits CapitaLand and CDL
By Alvin Foo, Markets Correspondent

PROPERTY plays came under the spotlight this week as Singapore stocks
enjoyed a technical rally due to falling oil prices and a midweek
rebound on Wall Street.

The bulk of investor attention was centred on two stocks - CapitaLand
and City Developments (CDL) - with both reaping good gains.

CapitaLand shares soared 32 cents or 5.7 per cent to $5.91 for the
week, while hitting a week-high of $6.30 on Thursday morning.

CDL closed up 98 cents or 9.3 per cent at $11.50 yesterday but hit
$12.08 on Thursday.

Both counters were chief beneficiaries of the midweek Wall Street
rebound, but succumbed to profit-taking.

Property counters have endured considerable volatility since the
United States sub-prime crisis flared a year ago and the cooling real
estate market here merely made matters worse.

Last October, CDL shares were trading at $17 and CapitaLand at $8.50
but they have both plunged by close to 50 per cent since that 52-week
peak.

So this week's positive performance would have brought some overdue
cheers to investors.

'This rally was due mainly to an overall technical rebound, not a
change in fundamentals of the two companies,' said a dealer.

Analysts seem largely bullish on CapitaLand and CDL.

DMG Securities kept its buy rating on CapitaLand earlier this week
with a $6.85 price forecast, noting a '22.5 per cent upside
potential'.

DMG said CapitaLand's 'geographically diversified presence and wider
product offering across the property arena are comforting points'
amid the market turbulence.

A UBS report last week maintained its buy call on CapitaLand with a
$8.20 price target.

It noted: 'CapitaLand remains our key pick, given its strong balance
sheet and pan-Asian diversification compared to the residential
developers.'

Credit Suisse also kept its 'neutral' call on South-east Asia's
largest property developer with a $6.75 target.

On Wednesday, DBS Vickers made an overweight call on the property
sector: 'We believe that the big-cap stocks will be the first
beneficiary of a re-rating in the sector.'

CDL was named among its top picks, with a buy call and $12.90 price
target as it is 'the key proxy to the residential market'.