They have a low price-to-book ratio despite high dividend yield.
CapitaLand Limited (SGX: C31) is a real estate developer and owner and is one of the largest companies in Singapore’s stock market. Its diversified global real estate portfolio includes integrated developments, shopping malls, serviced residences, offices and homes.
At the current price of S$3.48, CapitaLand’s shares are just 1.8% higher than a 52-week low of S$3.42. This raises a question: Is CapitaLand actually cheap now? This question is important because if CapitaLand is cheap, it might be a good opportunity for investors.
Unfortunately, there is no easy answer. But, we can still get some insight by comparing CapitaLand’s current valuations with the market’s. The three valuation metrics I will focus on are the price-to-book (PB) ratio, price-to-earnings (PE) ratio, and dividend yield.
I will be using the SPDR STI ETF (SGX: ES3) as a proxy for the market; the SPDR STI ETF is an exchange-traded fund that tracks the fundamentals of Singapore’s stock market benchmark, the Straits Times Index (SGX: ^STI).
CapitaLand currently has a PB ratio of 0.77, which is lower than the SPDR STI ETF’s PB ratio of 1.20. Similarly, Capitaland’s PE ratio is lower than that of the SPDR STI ETF’s (10.0 vs 11.09). In addition, the real estate giant’s dividend yield of 3.4% is higher than the market’s yield of 2.89%. The higher a stock’s yield is, the lower is its valuation.
When I put it all together, I can argue that CapitaLand is currently trading at a discount to the market, given its lower PB and PE ratios, and higher dividend yield.
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