CapitaLand Limited (SGX: C31) is one of the largest real estate companies in Asia with assets under management (AUM) totaling a staggering S$123 billion as of 30 June 2019.
The real estate conglomerate has built many iconic buildings around the world, such as ION Orchard in Singapore and Raffles City, Beijing and Chongqing are also two others which are just as stunning.
CapitaLand has a diversified real estate portfolio spanning many aspects of the real estate business. This includes the development of residential and commercial properties, owning and managing shopping malls, offices and serviced apartments. The latter part of the company’s business is done through its funds and its four listed REITs.
Here are two metrics I analysed to see how the real estate giant has performed over the past three years.
Earnings per share
Earnings per share (EPS) at CapitaLand has compounded at an impressive 19.0% in the past three years. This is on the back of EPS growing from 25 Singapore cents in the financial year (FY) 2015 to 42.1 Singapore cents in FY 2018. What is interesting about CapitaLand’s revenue and earnings is the fact that the conglomerate has been trying to increase its recurring revenue base for the last few years.
This is important as the other part of its business, which entails property development, can often be lumpy due to the long duration required to develop new properties. As at the end of 2018, it had managed to bring its ratio of non-recurring-to-recurring income to 21:79 which was a shift from 26:74 in 2015. This is good news, as it means investors don’t have to grapple as much with lumpy earnings.
In addition to the above, CapitaLand also announced the completion of a merger with Ascendas-Singbridge on 30 June 2019. This merger would give CapitaLand access to the properties and funds owned by the acquired company.
One of the major, new real estate sectors that CapitaLand will get from this merger is exposure to industrial properties. This would come in the form of a REIT – Ascendas REIT (SGX: A17U). This addition, together with the other assets which come with the merger, should give investors confidence that CapitaLand has positioned itself well for the future.
Secondly, we have seen that Capitaland has been growing its EPS at a strong rate but have they shared this with their investors? Certainly, it has boosted its dividend payout from 9 cents to 12 cents over the mentioned period. This implies a CAGR of 10.1%.
I believe that the dividend hike would have been larger in 2018, however, due to the pending merger CapitaLand probably decided to hold onto the cash to fund the acquisition. This is a prudent move by the company as it prevents it from taking on excess debt. On the dividend front, I believe investors will have to be slightly more patient but the Ascendas-Singbridge acquisition should provide a level of confidence given the step up in expected recurring income.
To sum up, CapitaLand has successfully grown its EPS and raised its dividends over the past three years. Together with its merger with Ascendas-Singbridge, I believe the real estate giant has positioned itself well for the future and should be considered for investors’ portfolios.
Want to better understand how to benefit from the investing landscape here in Singapore? Click here now for your FREE subscription to The Motley Fool’s investing newsletter. 'Take Stock' lets you know exactly what’s happening in today’s markets, and shows how you can GROW your wealth in the years ahead here
Motley Fool writer Esjay contributed to this article. Esjay doesn't own shares in any companies mentioned.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool has recommended shares of CapitaLand Limited and Ascendas REIT. Motley Fool Singapore contributor Tim Phillips owns shares in Ascendas REIT.