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Tug-of-Fools: CapitaLand – The Bull Argument

250px-Bulle_und_Bär_FrankfurtOnce you step out of Jurong East MRT Station, you will notice an ice-cube-like structure that looks somewhat out of place. It goes by the name of “JCube”. And if you are observant enough, you might also notice the building owner’s name – CapitaMall Trust (SGX: C38U) – stamped on the building.

The weird-looking building is just one of the many shopping centres owned by CapitaMall, which is part-owned by CapitaLand Limited (SGX: C31).

Brand Name and Ubiquity

One of the reasons why I like CapitaLand is that it has a brand name and it is, literally, everywhere. CapitaLand is one of Asia’s largest real estate companies. Its portfolio consists of homes, offices, shopping malls, serviced residences and mixed developments.

CapitaLand has one of the largest real estate fund management businesses with assets located primarily in Asia. It has eight public listed entities in both Singapore Exchange and Bursa Malaysia.

Resilient Business

CapitaLand has about 100 malls that span Singapore, China, Malaysia, Japan and India. In Singapore, the shopping malls owned by CapitaLand include ION Orchard, Plaza Singapura, Raffles City, Funan DigitaLife Mall, Bugis+ and Junction 8.

The mall business is quite resilient in the sense that even during recession, people would still need their regular dose of fun. Many will still go to the cinemas and shops. Not forgetting the food courts and fast-food restaurants for their meals, of course.

Offices at Prime Locations

CapitaLand’s commercial portfolio boasts quality Grade A and prime offices in Singapore such as Capital Tower, Six Battery Road, One George Street and Twenty Anson. These prime properties are located in the heart of Singapore.

China Story

As of Financial Year (FY) 2012, CapitaLand had 38.7% of its assets in China and 35.4% of its assets in Singapore as seen below.

capitalandassets

(Source: CapitaLand Annual Report 2012)

CapitaLand is investing more in China. Recently, it announced that CapitaLand China, a wholly-owned subsidiary of CapitaLand, paid S$397.5 million for a 70% stake in Shanghai Guang Chuan Property Co Ltd, which owns a prime site in Hanzhonglu, Zabei. This area is just 1.5km away from CapitaLand’s flagship Raffles City Shanghai.

Former Chief Executive Officer of CapitaLand, Liew Mun Leong, once said that, “Urbanization and economic growth will support demand, and the Chinese people love to buy their own homes. Also, there’s no alternative class of investment—they can’t invest outside of China, they don’t understand anything about equities, but they understand how to buy an apartment.

I believe CapitaLand is in China for the long haul and the short-term scares that have spooked the markets recently should not hinder its plans.

In the Near Term

In December this year, Jurong East will see another building springing up and it will be called Westgate. It will become part of CapitaLand’s portfolio once completed and it will be a 420,000 square feet mall, with a 20-storey Grade A office block.

In Summation

CapitaLand is setting its footprints in all the right places. I believe it will continue being one of Asia’s largest real estate companies and fly our Singapore flag high!

That concludes the bull argument. You can read Ser Jing’s bear case here.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool contributor Sudhan P doesn’t own shares in any companies mentioned.