Dec[7] - Capitaland (Asset Hunting)

COUNTER: CAPITALAND LIMITED

OVERVIEW:
Headquartered in Singapore, Capitaland is one of the Asia's largest real estate companies. Its portfolio includes integrated developments, shopping malls, serviced residences, offices and homes across Asia countries. REITs under its business structure includes Capitaland Mall Trust, Capitaland Commercial Trust, Ascott Resisdence Trust, Capitaland Retail China Trust and Capitaland Malaysia Mall Trust.

HIGHLIGHTS:
[1] Latest quarter saw revenue and net profit up 27% and 11% year on year. Adjusted profit for past 9 months up 13% year on year.

[2] 81% of asset are located in Singapore and China. In China, 93% of property are in tier 1 and 2 cities. 76% of total asset contributes to recurring income.

[3] Total debt/equity ~ 65%, Interest coverage ~ 4.

INVESTMENT THEMES:
[1] 9 month earning per shares - 0.17 || Dividend per shares ~ 0.09 || Net Tangible Asset - 3.9
Last trading price 2.97 translates to PE ~ 13, dividend yield > 3% and 24% discount to net tangible asset value, which is attractive.

[2] Management indicated resilient and steady performance from local market. More residential projects to be launched in China as well as Vietnam, so higher revenue to be recognized on coming quarter.

[3] The group managed to recycle mature assets into listed REITs as well as its fund management platform, so as to reduce balance sheet requirement while scale up asset under management (AUM). It is now on track to grow AUM up to $10b by 2020.

[4] The group shows disciplined interest cost management record throughout the years, which could be well prepared for widely-expected high rising interest rate period ahead.

PRICE TREND:
Upon Yellen's latest announcement on rate hike and China president Xi Jinping's comment about cooling property speculation, local real estate counters were taking double blow. Selling pressure prevailed meantime. Looking at price trend of the counter, it used to range bounce between 2.8 to 3.2. Recent falling seems to be correction instead of panic selling. Bargain hunting period present instead, as it represents higher dividend yield as well as more discount into net tangible asset value.