Would Benjamin Graham Buy CapitaLand Limited?

Formed in 2000 out of a merger between DBS Land and Pidemco Land, CapitaLand Limited (SGX: C31) has become one of Asia’s largest real estate companies. Headquartered and listed in Singapore, the company’s business is focused on the home market and also in China.

CapitaLand’s core businesses are in real estate development, hospitality and real estate finance. The company’s listed subsidiaries and associates include four real estate investment trusts: CapitaMall Trust (SGX: C38U), CapitaCommercial Trust (SGX: C61U), Ascott Residence Trust (SGX: A68U) and CapitaRetail China Trust (SGX: AU8U).

CapitaLand boasts a strong set of financials and a healthy balance sheet. Total assets value of nearly S$42b includes current assets worth around S$11.6b. Of this S$2.6b is in the form of cash or cash equivalents. From this is borne a safe looking current ratio of 2.5, so nobody should have too much doubt about the company’s ability to manage its liabilities.

Whilst CapitaLand appears to have plenty in the way of assets, its market capitalisation is only S$14b. This prices it around 10% below its book value, which suggests that some value could be found here.

The company also offers investors decent rewards. Currently the earnings yield is about 7% whilst the dividend yield, which has been growing at nearly 8% a year over the last five years, currently stands at 2.4%. This puts it on par with the returns available from a risk-free investment such as the 10-year US Treasury.

With the annual growth rate in CapitaLand’s revenue standing at a similar level, just shy of 8% a year, investors might be hoping that dividends could continue to grow. However, the main advantage that CapitaLand has over a risk-free investment is the potential for its true value to be realised.

Its price to earnings ratio of 14.6, which is in line with the market average, could suggest that CapitaLand might be priced just about right. Others might be more optimistic and hope that CapitaLand’s market value has room to grow, bringing it more in line with its book value.

Either way, CapitaLand does not appear to be too dearly priced. It is in a healthy position and seems capable of providing investors with a steady stream of income. It might just have caught the interest of Benjamin Graham devotees.

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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.