CapitaLand Limited (SGX: C31) is one of the largest real estate companies in Asia with assets under management (AUM) totalling a staggering S$92.8 billion as at 30 September 2018.
The real estate conglomerate has built many iconic buildings around the world. In Singapore, CapitaLand’s ION Orchard is one of the landmark locations along Orchard Road. Meanwhile, Raffles City Beijing and Raffles City Chongqing are another two noteworthy CapitaLand developments located in China.
The above are just three examples of the numerous assets the company owns. CapitaLand has a presence in more than 170 cities spread across 30 countries with its two core markets in Singapore and China.
The real estate conglomerate has a diversified portfolio spanning many aspects of the real estate business. That includes the development of residential and commercial properties, owning and managing shopping malls, offices and serviced apartments. CapitaLand also has stakes in 16 private Funds and five REITs, including CapitaLand Mall Trust (SGX: C38U), CapitaLand Commercial Trust (SGX: C61U), Ascott Residence Trust (SGX: A68U) and CapitaLand Retail China Trust (SGX: AU8U) in Singapore and CapitaLand Malaysia Mall Trust (KLSE: 5180) in Malaysia.
For 2018, CapitaLand’s total returns were a negative 16.2%. In comparison, the Straits Times Index (^STI), which trades on the SGX, recorded a 12.3% decline. Given its decline, it would be a good time to check-in to see how the company is valued.
With that in mind, let’s analyze the CapitaLand’s financials to understand how the company is doing and if it is a bargain at current prices. For this, we will be using four metrics, price to earnings (P/E) ratio, price to book (P/B) ratio, dividend yield and net debt to equity ratio.
The real estate conglomerate has a diluted trailing twelve months (TTM) earnings per share of S$0.333. The company’s current share price stands at S$3.25. The implied P/E ratio would be 9.8 which is higher compared to its historical PE ratio of around 9.0.
At the end of the third-quarter of 2018, CapitaLand reported a net asset value of S$4.34. Based on this figure, we get a P/B ratio of 0.75. A company with a P/B ratio of less than 1 implies that investors are getting the assets held by the company for a discount, adding a margin of safety for investors.
Moving on, we can look at its net debt to cash position. As at end September 2018, the company had a net debt of S$16.5 billion and total equity of S$32.7 billion, indicating a net debt to equity ratio of 0.51. Between 2014 and 2017, CapitaLand had a net debt to equity ratio of between 0.41 to 0.57.
Lastly, the company’s dividend has been increasing over the last four years from S$0.09 at 2014 to S$0.12 in 2017. Assuming the company pays out a dividend at the same rate as 2017, we would get a dividend yield of 3.8% at current prices.
Pulling Everything Together
Looking at the four metrics, it seems like CapitaLand might be a bargain at current prices based on all four metrics above. Investors, however, should dig deeper into the company to understand its business better before deciding to invest.
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The Motley Fool Singapore contributor Esjay contributed to this article. Esjay owns shares in Capitaland Commercial Trust, Ascott Residence Trust, CapitaLand Retail China Trust, and CapitaLand Mall Trust.
The information provided is for general information purposes only and is not intended to be personalized investment or financial advice. The Motley Fool Singapore has recommendations for shares of Capitaland Commercial Trust, Ascott Residence Trust, CapitaLand Retail China Trust, CapitaLand, and CapitaLand Mall Trust. The Motley Fool Singapore writer Chin Hui Leong owns shares CapitaLand Mall Trust.