Tuesday 14 November 2017

City Developments vs CapitaLand

The recent release of CapitaLand's latest financial results sent the share price downwards despite it being a decent set of results.

As I was thinking about this, it led me to the next questions.

Why is it that City Developments can be trading in the region of S$12+ while CapitaLand continues to languish at S$3+ and what are the differences between the two companies?

It piqued my interest as I have never delved into City Developments before and I set to find out more.

The comparisons gave me a big surprise.

 Overview of City Developments (CDL)

City Developments Limited has a history of more than 50 years since their beginning in a small rented office in Amber Mansions on 7th September 1963.

They have since evolved into a Singapore-listed international real estate operating company with presence in 26 countries including Singapore, Australia, China, Japan, UK and rest of Europe.

CDL's portfolio consists of residences, offices, hotels, serviced apartments, integrated developments and shopping malls.

One of their most recognised brands is the Millennium & Copthorne hotels chain.

CDL's core markets are UK, US, China, Japan and China.

Overview of CapitaLand (CPL)

CapitaLand group is a property company created from the merger of Pidemco Land and DBS Land in November 2000.

Since then CPL has grown to become one of Asia's largest real estate companies. Based and listed in Singapore, it is an owner and manager of a S$85 billion portfolio comprising integrated developments, shopping malls, serviced residences, offices, homes, REITs and funds in over 30 countries.

It is also one of the largest investment management businesses in Asia with 14 real estate private equity funds and 5 REITs worth over S$47 billion in assets under management.

CapitaLand acquired Raffles Holdings and The Ascott Group in 2006 and 2008 respectively and the latter is the world's largest international serviced residence owner-operator.

Singapore and China remain the two core markets of CPL, totalling 82% of the group's total assets.

Comparison of the Financial Figures

As mentioned earlier I have never studied CDL before. But inferring from the share price I expect the scale of their business to be much bigger than CapitaLand.

However this is exactly the opposite.

No matter which metric you look at - cash holding, revenue, PATMI, assets or AUM, CapitaLand is clearly the bigger player.

Exception is the EPS where CDL is slightly higher than CPL.

Note: Figures are from the 3Q17 financial reports of both companies.


I then did some quick calculations for the latest P/E and P/B ratios as a gauge of their valuation.

Again CPL is the winner here. In fact CPL is currently trading under book value whereas CDL is trading slightly above book.

Future Growth of City Developments

In 2016 CDL acquired 20% stake in mamahome - China's fast-growing online apartment rental platform.

In 2017 CDL acquired 24% stake in Distrii - China's leading operator of co-working space.

These synergistic acquisitions are a move away from their traditional sources of income and it's nice to see this forward-looking direction of the management.

In the near term, CDL has several upcoming local residential projects including New Futura, a Tampines Ave 10 project and South Beach Residences.

Upcoming overseas residential projects include 1 in China, 7 in UK and 1 in Japan.

CDL also embarked on 2 projects in Australia for luxury retirement village development with expected completion in 2020 and 2021.

CDL is also actively engaging in asset enhancement initiatives for various Millennium & Copthorne hotels in New Zealand, UK, KL and Singapore.

Future Growth of CapitaLand

CapitaLand has over 8,000 residential units with a value of RMB 13.8 billion sold in China and expected to be handed over from 4Q17 onwards. 10% of the value is expected to be recognised in 4Q17 and 70% in 2018.

On the shopping mall front, CPL opened their largest mall - Suzhou Centre Mall three days ago on 11th Nov 2017.

CPL is also set to continue their expansion in markets such as Vietnam and Indonesia. Their residential project in Vietnam - d'Edge is close to 100% sold.

SingPost Centre opened on 12th Oct 2017, is CPL's first managed mall in Singapore under management contract.

Apart from the above, CPL has 6 management contracts in China to date as well.

CPL also launched CapitaLand online mall on Lazada on 16th Oct 2017.

It's good to see these new initiatives from CPL which show that the management is actively looking for new income sources.

On the serviced residences front, Ascott is on track to achieve their target of 80,000 units under management by 2020.

Summary and Conclusion

Beside the fact that both are real estate companies, City Developments and CapitaLand are also similar in terms of assets composition, development type and geographical composition.

In terms of business scale, CapitaLand is much bigger with significantly higher top and bottom lines compared to City Developments.

However in terms of share price, City Developments is the clear winner. Since January this year, share price of CDL has rose 50% while share price of CPL has increased by 18%.

Shareholders make money either through dividends and / or capital appreciation.

Since both CDL and CPL are not fantastic dividend counters I will look at capital appreciation instead.

For capital to appreciate, the share price must appreciate. Simple.

Based on the basic valuation metrics, CapitaLand share price has much room for appreciation.

However since the share price has dropped after the release of 3Q17 results, is it because shareholders feel that the results are not comparable to the previous year?

Comparing Y-o-Y revenue, latest 3Q indeed fell by 0.1%.

However Y-o-Y, profit increased by ~70%, EPS increased from $0.179 to $0.302 and ROE increased to 4.97% from a negative figure.

This is what perplexes me. The company is earning more and generating more returns on the shareholders' investment but the market feels otherwise.

Can anyone enlighten me please?


  1. Hi JASS

    CDL did not revalue their hotels so that is one of the reason for the lower NAV they state on their book.

    I also think that CPL are more diversed in terms of geographical and touching on more on the China side, which is why their share price is more muted. The market is bullish about the rebounding of the property market locally which is probably why the market taps on CDL more at this point.

  2. Hi B,

    Appreciated your feedback. I guess if CDL revalue their hotels they would be trading at a discount to book too.

    Anyway I just found out CPL is the biggest institutional sell counter last week.

  3. Whats so baffling..

    More people in the market along the fund houses, think that cdl results are better than cpl, different from ur opinion. They then sell the shares resulting in price drop.

    Its bettet to accept that market will always surprise u.and u cannot reason w market. Then ur investment path will be easier. Every q want to ask to the bottom cannot invest liao

    U shd either ignore mkt and buy/sell according to ur rules/reasons. Or follow the trend and trade without question.

    1. I like what you said - we cannot reason with the market.

      I know that but still can't resist going in depth to find the reasons for certain phenomenon.

      Anyway trend trading is what I like but is also what I sucks at. Need to study more of that.

      Thanks for your feedback.