Here Are 2 Companies With Exposure To The Potential US$1.57 Trillion Smart Cities Market

One big growth area in the global economy could be Smart Cities.

Market research outfit Frost and Sullivan has predicted that Smart Cities would be a US$1.57 trillion market by 2020. This corroborates with estimates from Mordor Intelligence that the Smart Cities market would grow to a size of US$1.39 trillion in 2020.

The basic idea behind Smart Cities is the application of digital technologies to enhance the lives of residents. The Smart Cities concept has a lot of different sub-sectors, such as smart healthcare, smart building, smart mobility, smart infrastructure and more.

This goes to show that there are many different ways for companies to capitalise on the Smart Cities trend if they wish to do so.

In Singapore’s stock market, there are companies that are into Smart Cities. Real estate juggernaut CapitaLand Limited (SGX: C31) is one.

Last year, the company had partnered with Korean technology conglomerate Samsung to provide smart living solutions to its serviced apartments. In another instance, CapitaLand revealed in February this year that a smart home starter kit is one of the features of its upscale Cairnhill Nine integrated development at Orchard Road.

Another company that is in Smart Cities-related businesses would be DeClout Limited (SGX: 5UZ). It is in the technology field and has many different businesses, such as providing data centre equipment and e-commerce platforms, among others.

The company’s revenue has nearly quadrupled from S$73 million in 2013 to S$280 million in 2015. But, profitability has been elusive at times. In the first-quarter of 2016, DeClout’s revenue experienced year-on-year growth of 17%, but its loss had widened from S$2.6 million to S$4.6 million.

A Foolish conclusion

But it is too early to say if any Smart Cities-driven revenue will be a major source of income for CapitaLand and DeClout. If Smart Cities can really be a market of over US$1 trillion in 2020, it is likely that many companies will be vying for a slice of the pie; there is thus no guarantee that CapitaLand and DeClout can benefit from the potential growth of the Smart Cities market.

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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 Ong Kai Kiat doesn't own shares in any companies mentioned.