Tuesday, June 16, 2015

Seeking Alpha: CapitaLand Still Not Getting Much Benefit Of The Doubt

The self-improvement story at Singapore's CapitaLand (OTCPK:CLLDY) has run up against investor concerns about the property markets in Singapore and China, and so far the concerns are winning. CapitaLand has gone nowhere fast since my last update on the company, as the local shares have climbed about 5% and the ADRs are down about 3%. That's pretty close to the performance of fellow Singapore property developer City Developments (OTCPK:CDEVY) and Chinese developers like Sung Hung Kai Properties and Hang Lung Properties; there have been outperformers in the comp group, but overall I think the performance of CapitaLand is more of a sector phenomenon than a verdict against the company.

I continue to believe that CapitaLand is undervalued on its potential, but it is incumbent upon management to prove that it can deliver on that potential. The company's suburban malls in Singapore and China are doing well (and there's growth/expansion potential into markets like Indonesia and Malaysia) and the company's expertise in integrated project development is leverageable across a large potential base of projects. If CapitaLand can hit the middle of its ROE target in five years, a fair value of $6/ADR still makes sense and an NAV approach supports a similar fair value.

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CapitaLand Still Not Getting Much Benefit Of The Doubt

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