Sunday, June 24, 2018

CapitaLand Continues To Build Out From A Strong Core

Singapore’s CapitaLand (OTCPK:CLLDY) (CATL.SI) is never going to be an “easy follow,” as the basic business model of buying land, developing it, and selling it down the line creates inherent volatility and lumpy financials. While CapitaLand has a solid track record of building value through its property development activities, the market is rarely comfortable enough with the basic model to give the shares any sort of premium, and the local shares have basically marked time between S$3 and S$4 for most of the last decade.

Although I don’t believe you get very far arguing with the market, I do think CapitaLand has generated returns above its cost of capital over the last decade, but the accounting is not simple and that outperformance is not an annual feature (CapitaLand under-earned its cost of capital by my estimation in two of the last three years and three of the last five). With management committed to more capital recycling, though, expanding into new territories and generating more recurring revenue, I believe the valuation is still appealing.

Continue to the full article:
CapitaLand Continues To Build Out From A Strong Core

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