The Best Capita Company To Buy

Capitaland_logoWe sometimes forget just how young property developer CapitaLand (SGX: C31) really is. The Singapore company has only been around for 14 years following a merger of DBS Land and Pidemco Land. But since 2000, CapitaLand has grown into one of Asia’s largest real estate companies.

By way of comparison, peers City Developments (SGX: C09) is worth S$9.8b; Keppel Land (SGX: K17) is valued at S$5.3b and UOL Group (SGX: C09) has a market capitalisation of S$9.8b. CapitaLand has a market value of S$13.2b. It is smaller than Hongkong Land (SGX: H78), though, which is worth S$19.8b.

Over the years, CapitaLand has strategically spun off various parts of its business starting with CapitaMall Trust (SGX: C38U) in 2002. Its portfolio of Singapore-quoted stocks now include CapitaCommercial Trust (SGX: C61U), CapitaRetail China Trust (SGX: AU8U), Ascott Residence (SGX: A68U) and CapitaMalls Asia (SGX: JS8), which is in the process of being re-acquired.

Since 2001, CapitaLand has delivered a total annual return of around 5.5%. Over the same period, the wider market, as measured by the return from the Straits Times Index (SGX: ^STI), has been about 7%.

Interestingly, the company’s returns improved significantly a year later, when the total annual return to date jumped to 14%. At the same time, the company’s newly-listed trust, CapitaMall Trust, delivered a slightly better annual return of 14%.

CapitaCommercial Trust, which specialises in income-producing commercial properties in Singapore, was not formed until 2004. Since its flotation, it has delivered an annual total return of about 14%, too. It took another two years before the company’s hospitality unit, Ascott Residence Trust, made it to market. Its annual total return has been a market-beating 7.6%.

CapitaRetail China Trust is the new kid on the block. It has only been on the market since December 2006. Since its Initial Public Offering, the trust has underperformed the market with an annual total return of just 1.5%.

Currently, the Capita group of companies are trading at or around their book value, so there are no immediately obvious bargains for asset hunters. Yield hunters might fare better, though. Ascott Residence boasts a yield of 7%, while CapitaLand has the lowest yield at 2.6%. The others are clustered around 5%.

The Capita group of companies could provide fertile hunting ground for investors who might be targeting specific sectors. These include shopping malls both home and abroad, private residences and commercial offices.

As to which might be the best, it is probably instructive to remember that the property sector is a typical cyclical industry. Its fortunes tend to rise and fall with the economy. So, the clue is to know which part of the economic cycle we are in at the moment.

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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 Director David Kuo owns shares in CapitaRetail China Trust.