The Four Ways That CapitaLand Makes Money

CapitaLand Limited (SGX: C31) is a real estate developer and owner. It is one of the largest companies in the Singapore stock market.

Its diversified global real estate portfolio includes integrated developments, shopping malls, serviced residences, offices and homes.

Given the diversity of its businesses, investors may find it difficult to understand how the conglomerate makes its money.

Therefore, in this article, we will try to simplify the complex group to provide investors with a quick overview of how the company makes its cash.

Segment analysis:

c31ebit2015 c31revenue2015

Source – 2015 annual report

To better understand the income of Capitaland, we will use the same approach as the management by categorising them into four strategic business units:

  1. CapitaLand Singapore – This segment focuses on developing properties for sales in Singapore and Malaysia. It is also the owner and manager of commercial and industrial properties in this region.
  2. CapitaLand China – This is the biggest segment in term of revenue, accounting for 42.8% of the revenue of the whole group. This business unit is involved in the residential, commercial and integrated property development in China.
  3. CapitaLand Mall Asia – This is the smallest segment in term of revenue, yet it has the highest earnings before interest and tax (34.3%). In this segment, the business owns and manages shopping malls in Singapore, China, India, Japan and Malaysia.
  4. Ascott – Ascott is a subsidiary of CapitaLand. It is an international serviced residence owner-operator with a presence in the key cities of Asia Pacific, Europe, United States of America and the Gulf regions. It operates three brands, namely Ascott, Somerset and Citadines.

In summary, there are many moving parts that investors should consider.

By breaking down the income of Capitaland, investors can have a better overview of the profitability of the whole company by aggregating the earning profiles of different businesses.

For example, the business of CapitaLand Mall Asia and Ascott are more rental driven – more stable whereas the other two segments are exposed to the cyclical nature of property development business.

Thus, this exercise should help investors form better judgement on the long term prospects of this company.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.