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Capitaland: Bought at $2.35.

Friday, December 9, 2011

Property counters continue to be sold down today. Mr. Market is really worried about the aggressive cooling measures announced by the government, it seems.

What do we do when there is lots of fear and prices are battered down? Ask ourselves if there could be some good stocks we might be able to buy on the cheap. I wondered especially if all property counters are going to be affected to the same degree?

Companies which develop luxury residential real estate like SC Global and Ho Bee are likely to be more affected by the new cooling measures as a bigger proportion of buyers of the properties they develop are foreigners. The impression I have is that they are also less diversified and have a bigger chunk of their business in Singapore luxury residential properties.

Fundamentally, in comparison, the more diversified Capitaland is probably less affected and, in fact, with plans to spin off more properties in China into two new REITs, it could see positive interest from the investment community in an otherwise down market. Capitaland is likely to weather the storm pretty well.

Technically, $2.35 looked like it could be a strong support, having been breached only once since April 2009. So, I put in an overnight buy order at $2.35 which was filled this morning.

Well, today marks the second time this support has been breached since April 2009. The counter's price managed to close at $2.35 but not after touching a low of $2.31. Volume, although still relatively high, reduced today as a black spinning top was formed. This is a possible reversal signal but in case of further weakness, next support is at $2.28.

Related post:
Selling a private property just got harder.


Ray said...

Sorry to be a wet blanket but China property market is undergoing correction and the vacancy rate is very high now. How do you think Capland will be affected by that?

Ray said...

Hi Ak, can ask you abt your sentiments on SPH? Fell way beyond the dividends worth after XD. Good buy now?

AK71 said...

Hi Ray,

Capitaland's exposure to the Chinese residential real estate market is not very big. As a percentage of its exposure to China, it is about 40%. As a percentage of its total portfolio, it is about 14%. These numbers are off the top of my head from recent reports I read.

So, if we think that its Chinese residential real estate business is going to zero, we can knock 14% off its NAV which I mentioned in an earlier blog post is at $3.30 a share. How likely is that?

Is Capitaland undervalued now? I think so.

AK71 said...

Hi Ray,

Serendib asked me in another blog post whether SPH could retest $3.50 for support. Well, with sentiments so bearish, $3.50 is only 5% lower.

See my reply here.

Ray said...

Hi AK, do you know the dividend yield of Capitaland?

AK71 said...

Hi Ray,

I don't think we are investing in Capitaland for dividends. For what it is worth, Capitaland paid out 6c per share this year. At the current price, it is a dividend yield of 2.55%.

Last year, it paid out 10.5c per share. Rather inconsistent.

Ray said...

Hi AK, If I'm not wrong u r not vested in Kep Corp and SIA. Mind telling me why? They r at very cheap valuation now.

AK71 said...

Hi Ray,

I have to rely on TA for KepCorp because I am not so familiar with its fundamentals. I would like to buy some if it should retest its recent low of $7+, iirc.

I have on two occassions been a shareholder of KepCorp at $1 and $3+. I sold off my investments too soon, on hindsight. What's new? ;p

I have never been a shareholder of SIA. It is a high capex business and very vulnerable to external shocks. Extremely cyclical. I think it is too exciting for my weak heart. OK, maybe, I am just looking for excuses not to do more detailed FA and TA here. ;p

Ray said...

After some analysis, I have become a shareholder of Cap Land.
Bought two puny lots at $2.34.
one cent cheaper :P

AK71 said...

Hi Ray,

I am sure you did a great job of analysing Capitaland before deciding to buy in.

I feel comforted by this since I too have a long position in Capitaland. ;)

Marco said...

What is the historical PE at $2.35?
I do invested in Qcapita, a joint venture REIT between Capitaland and Quill group in Malaysia.

AK71 said...

Hi Marco,

Here is a useful link:

Capitaland's financials.

PE: 9.81x
Price to book: 0.74x

Ray said...

Trading at $2.26 now. Is it going to be a free fall?

I'm waiting for a Santa Claus rally...

AK71 said...

Hi Ray,

Your take on this is as good as mine. ;)

I was just drawing some lines earlier for Capitaland and was wondering if we could see $2 eventually. Hahaha...

Ray said...

would you consider selling them now in hope to buy back cheaper later? from the way things are going, a sell down seem imminent.

AK71 said...

Hi Ray,

I hate suffering from seller's remorse. Haha.. So, I never sell when prices are declining.

Prices go down a river of hope and I would only sell on rebounds. If it doesn't happen, too bad for me.

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