3 Things For Investors To Know About The Newest Addition To The Straits Times Index, CapitaLand Commercial Trust

There will be a change in the 30 constituents of the Straits Times Index (SGX: ^STI) come 21 March 2016. Following a quarterly review, the index’s co-creators – Singapore Press Holdings Limited (SGX: T39) and Singapore Exchange Limited (SGX: S68) – had announced last week that CapitaLand Commercial Trust (SGX: C61U) will be replacing Noble Group Limited (SGX: N21).

Seeing that CapitaLand Commercial Trust is going to join Singapore’s major stock market index in three weeks’ time, I thought it’d be a good idea to run through three important things investors may want to know about it.

The CapitaLand family

CapitaLand Commercial Trust is one of the many real estate investment trusts that are sponsored and managed by local real estate heavyweight CapitaLand Limited (SGX: C31).

With the addition of CapitaLand Commercial Trust, the CapitaLand group would have three constituents in total in the Straits Times Index with the other two being CapitaLand Limited and CapitaLand Mall Trust (SGX: C38U).

The assets

CapitaLand Commercial Trust is one of the largest owners of commercial buildings in Singapore. The REIT, with a market capitalisation of S$4.4 billion, owns 10 properties in Singapore including well-known buildings such as Raffles City Singapore and Capital Tower. The trust also owns 17.7% of MRCB-Quill REIT (KLSE:5123.KL), a commercial REIT listed in Malaysia.

The latest addition to the Straits Times Index currently has S$6.6 billion worth of assets on its balance sheet, a figure that has grown at 11.5% annually since 2004, the year of its listing.

The valuation

Being an owner of real estate, CapitaLand Commercial Trust’s book value per share may be a good proxy for its real economic worth. As such, viewing CapitaLand Commercial Trust in terms of its price-to-book ratio might be relevant for investors.

Interestingly, the REIT is now trading at only 0.8 times its book value, which is a valuation that’s near a five year-low. But, it is worth noting that the trust’s price-to-book ratio did fall to around 0.2 during the global financial crisis, according to data from S&P Global Market Intelligence.

The trust is also currently offering a fat distribution yield of about 5.8% now at its current share price of S$1.48 thanks to its distribution of 8.62 cents per unit in 2015.

Foolish Summary

Over the past 10 years, CapitaLand Commercial Trust has generated a total return of 88% after accounting for gains from reinvested dividends, according to data from S&P Global Market Intelligence. That works out to an annual return of 6.5%, which isn’t too shabby. Let’s see what the REIT can offer investors over the next 10 years.

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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 Stanley Lim doesn’t own shares in any companies mentioned.