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The Best Blue-Chip Property Share to Own

Within Singapore’s stock market bellwether, the Straits Times Index (SGX: ^STI), there are a number of property-related outfits. If we filter the list to include only property companies (and not real estate investment trusts or business trusts) with a track record of at least 10 years as a publicly-listed entity, we’re left with Hongkong Land Holdings (SGX: H78), CapitaLand (SGX: C31), and City Developments (SGX: C09).

All three carry huge market capitalisations and have property-related businesses that are centred mainly in Asia. With the real estate sector not exactly well-liked by the market currently, which share out of the trio might investors want to focus on for exposure to the sector?

Share

Market Capitalisation

Hongkong Land

US$16.1 billion

CapitaLand

S$13.8 billion

City Developments

S$10.0 billion

Source: S&P Capital IQ

Which for superior growth?

If growth is at the forefront of an investor’s thoughts, then Hongkong Land might just come out tops. Between 2003 and 2013, the company’s book value per share – an important measure of the value of real estate companies – has increased at an annual compounded growth rate of 19.3% 21.4%. There’s also been only one year in that time frame in which Hongkong Land’s book value had shown a year-on-year decline.

When held up against HongKong Land, CapitaLand and City Development’s growth looks decidedly pedestrian as their book values per share have only managed to increase by a compounded annual rate of 4.2% 4.6% and 3.7% 4.0% respectively. In addition, growth has also been unsteady, with a larger number of year-on-year declines in book value per share between 2003 and 2013.

Share

Book value per share: 2003

Book value per share: 2013

Total % change

Hongkong Land

US$1.64

US$11.41

598%

CapitaLand

S$2.41

S$3.78

57%

City Developments

S$5.56 S$1.07

S$8.26 S$1.74

49%

Source: S&P Capital IQ

And just for added emphasis, Hongkong Land’s shares have also rewarded shareholders the most since the start of 2004 with total returns (capital gains plus gains from reinvested dividends) of 455%. By way of comparison, CapitaLand’s total returns in the same period have been ‘only’ 270% while City Developments’ has been 129%.

Which for better dividends?

If an investor has a focus on his investments’ yield-on-cost, Hongkong Land Holdings would also emerge ahead of the pack.

Share

Share price on 1/1/2004

Dividends for 2013

Yield-on-cost

Hongkong Land

US$1.70

US$0.18

10.6%

CapitaLand

S$1.55

S$0.08

5.2%

City Developments

S$6.05

S$0.16

2.6%

Source: S&P Capital IQ

Hongkong Land’s high yield-on-cost is a manifestation of its ability to either grow or maintain its annual dividends in each consecutive year since 2003. That’s a record that both CapitaLand and City Developments cannot boast of, as shown below.

History of dividends

Year

Hongkong Land

CapitaLand

City Developments

2003

US$0.06

S$0.040

S$0.575

2004

US$0.07

S$0.060

S$0.075

2005

US$0.08

S$0.180

S$0.125

2006

US$0.10

S$0.120

S$0.250

2007

US$0.13

S$0.150

S$0.300

2008

US$0.13

S$0.070

S$0.075

2009

US$0.16

S$0.105

S$0.080

2010

US$0.16

S$0.060

S$0.180

2011

US$0.16

S$0.080

S$0.180

2012

US$0.17

S$0.070

S$0.130

2013

US$0.18

S$0.080

S$0.160

Source: S&P Capital IQ

Which for cheaper shares?

And if we come down to valuations, which should be important for investors to think about, Hongkong Land yet again proves superior when looking at the price-to-book ratio of the trio.

Share

Price-to-book ratio

Current share price

Hongkong Land

0.60

US$6.85

CapitaLand

0.83

S$3.20

City Developments

1.33

S$11.00

Source: S&P Capital IQ

With the lowest price-to-book ratio among the trio, investors would be paying the least for each dollar of Hongkong Land’s assets.

Foolish Bottom Line

As it stands, Hongkong Land has shown to be one of the best property-related shares when it comes down to its historical growth rates, dividends, and valuation. However, that doesn’t mean it would be the best performing share out of the three though.

Backward-looking data could help form part of our appraisal of a share’s performance going forward. But it’s the future of their various businesses that would ultimately determine their future returns and that’s something that has to be carefully thought through. Before that’s done, it would really be premature to single out Hongkong Land as one of the best property-related blue-chip counters to own.

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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 Singapore writer Chong Ser Jing doesn’t own shares in any companies mentioned.