Would Warren Buffett Buy CapitaLand Commercial Trust?

Warren Buffett’s investing philosophy is not difficult to understand. He is more interested in the income that an asset could produce, rather than potential increase in the price of the asset.

So what would the Sage of Omaha make of CapitaLand Commercial Trust (SGX: C61U)?

The Real Estate Investment Trust has been able to consistently deliver a reliable stream of profits over the last half decade. It has been lumpier over the last 10 years, though.

Since 2010, its median Net Income was S$417 million, with very little variation between the peak and the trough. This has allowed the REIT to pay a steady distribution to shareholders. The current yield is 5.9%.

CapitaLand Commercial Trust is not especially outstanding in terms of its use of assets. The median Asset Turnover of 0.05 is around 10 times lower than the market average. But this is not entirely surprising for a property company that is laden with expensive property assets.

The REIT has Total Assets of S$7.9 billion and Total Liabilities of S$2.9 billion. That equates to a Leverage Ratio of 1.5, which is comparable with the 30 companies that make up the Straits Times Index (SGX: ^STI).

On balance, CapitaLand Commercial Trust ticks many of the boxes that Warren Buffett would want to see in a long-term investment. The Price-to-Book of 0.9 could pique his interest too.

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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 Director David Kuo doesn’t own shares in any companies mentioned.