Would Benjamin Graham Buy CapitaMall Trust?

Within Singapore, CapitaMall Trust (SGX: C38U) boasts an impressive portfolio of well-known properties that includes Bugis Junction, Raffles City, Plaza Singapura and Clarke Quay.

As an investor in a REIT, you have partial ownership of the real estates it owns. In the case of CapitaMall Trust (CMT), this includes 16 shopping malls that plays home to nearly 3,000 rental leases.

All REITs are required to pay out at least 90% of their profits as dividends. For CMT this works out to be a sizeable dividend yield of 5%.

The yield is twice that of a risk-free investment such as the 10-year US Treasury. What’s more, CMT has a history of growing its dividend – the payout has increased by about 4% a year since 2009, with the company recently announcing that its third-quarter dividend was up 6.2% on the same period a year ago.

Having been as high as 50 in 2010, the current P/E ratio of 11 looks attractive from the perspective of a value investor. But would it be enough to tempt a value investor such as Benjamin Graham? Perhaps, given that its price-to-book ratio is around one.

CMT is not overly leveraged. Its total debt of S$3b is only half the total equity of the company. It also has cash of nearly S$1b.

Perhaps a little worrying is its current ratio of around one. But CapitaMall has shown that its strong income flow should continue to meet its financial obligations.

CapitaMall Trust looks in good financial health. It also appears able to grow steadily, whilst offering investors a decent return on their investment at the same time. Even a value stickler such as Benjamin Graham might be tempted to take a closer look.

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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 Adam Kuo doesn’t own shares in any companies mentioned.