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Important Differences Between Hongkong Land Holdings Limited and CapitaLand Limited That Investors Have To Know

Singapore is home to a few of the largest property companies in the region. Among the Straits Times Index’s (SGX: ^STI) 30 constituents alone, there are six property pure-plays. As an investor in Singapore’s share market, it’s hard not to come across property shares.

Two of the real estate companies listed in the STI are Hongkong Land Holdings Limited (SGX: H78) and CapitaLand Limited (SGX: C31). But just because they are both property pure-plays does not mean that there are no important differences you, as an investor, have to be aware of. Here’re a few.

Property ownership

It might come as a surprise, but Hongkong Land actually has a larger market capitalisation as compared to CapitaLand. At its current price of US$7.07 per share, Hongkong Land has a market cap of S$20 billion – that’s in contrast to CapitaLand’s market cap of S$14.5 billion at its current price of S$3.36. Why is Hongkong Land worth so much as a company?

The key reason is because unlike CapitaLand, which has a larger emphasis on property development, Hongkong Land is more focused on the ownership of properties. Here’s some pertinent stats to show the importance of property ownership to Hongkong Land: 1) In 2013 and 2012, revenue from the investment properties segment of the company’s business made up 50% and 77% respectively of its total revenue; 2) the portfolio of investment properties made up the bulk of the company’s profit, contributing 72% in 2013 and 77% in 2012; 3) the company’s investment properties form the majority of its assets.

CapitaLand meanwhile invests in physical real estate itself mainly through its listed real estate investment trusts such as Ascott Residence Trust (SGX: A68U)CapitaCommercial Trust  (SGX: C61U)CapitaMall Trust  (SGX: C38U), and CapitaRetail China Trust  (SGX: AU8U). In Malaysia, CapitaLand also has interests in the listed CapitaMalls Malaysia Trust.

Geographic differences

Another key difference between the two companies is in terms of geography. Hongkong Land has huge exposure to commercial properties in Hong Kong as one of the region’s largest property owners; the company owns 12 pieces of real estate in Hong Kong’s Central Business District, otherwise known as “Cheung Wan”.

This is very different to the geographical exposure of CapitaLand, which counts Singapore and China as its key markets. As I wrote once before:

“Interestingly, both countries account for roughly the same percentage of CapitaLand’s revenue and profit and together, made up 62% and 88% of the company’s 2013 revenue and profit respectively.”

Foolish Summary

Despite both being labelled as property plays, Hongkong Land and CapitaLand do have big differences in the nature of their business and their geographical exposure. That’s something investors have to note.

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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 contributor Stanley Lim doesn't own any shares of companies mention above