#2 CapitaLand Investment Limited
CapitaLand Investment Limited (SGX: 9CI) is s property investment management company with a presence in Asia Pacific, Europe, and North America. It manages about SG$24 billion in property value across the world and has a 95.8% occupancy rate.
CapitaLand's portfolio in Singapore consists of three main segments, namely retail, office, and integrated developments. Key developments include the likes of Bedok Mall, Bugis Junction, CapitaGreen, Raffles City Singapore, and the Atrium at Orchard. Singapore contributes around 20% to CapitaLand's revenue in 2022.
In terms of financial performance, revenue declined slightly to SG$1.345 billion in 1H 2023 from SG$1.354 billion in 1H 2022. Likewise, profits also declined to SG$417 million from SG$480 million over the same period due to the downward valuation of its properties.
CapitaLand could be worth taking a good look at for the following reasons:
- Higher profitability in its Singapore assets
While Singapore does not contribute the most to the revenue of Cland, it contributes the most to total Earnings Before Interest, Tax, Depreciation & Amortisation (EBITDA) for the company at 46% in 2022.
- Slightly higher return on asset
CapitaLand generates a return on assets of 2.8% compared to its peers' average of 1.6%.
At its current juncture, market analysts have CapitaLand at a BUY investment call with an average target price of SG$4.03.
Notwithstanding, it trades at a higher price-to-book of 1x as investors could be pricing in a recovery in valuations for its properties in 2023 and 2024.
#3 Frasers Property
Frasers Property (FP) develops, owns, and manages property assets in the residential, retail, commercial & business parks, and industrial & logistics sectors in 70 cities across the world.
Singapore remains the biggest country in terms of property assets at 35%, followed by Australia (27%), Europe (20%), and Thailand (13%) as of March 2023.
FP registered a strong financial performance growth in 1H 2023 (Sep 2022 - Mar 2023), with revenue growing by 15.6% to SG$1.9 billion. Meanwhile, its net profit declined to SG$420 million in 1H 2023 from SG$481 million in 1H 2022.
FP could be well positioned to benefit from the current hot property market conditions through:
- High portfolio concentration in retail and commercial & business parks sectors
Both retail and commercial & business parks sectors encompass about 43% of its property assets. FP currently has 13 shopping malls and six office and business space properties in Singapore.
- Near-full occupancy rates
Office and retail sectors in Singapore's property segment registered occupancy rates of 98% and 94% respectively.
- Residential sector in Singapore achieved higher sales in 1H 2023 (Sep 2022 - Mar 2023)
Singapore contributed higher profits at SG$332 million in 1H 2023 compared to SG$169 million in 1H 2022 due to higher selling prices from its residential developments.
In the market, analysts currently have an OVERWEIGHT recommendation with an average target price of SG$1.31. This implies a share price upside of 60.7% (as of 5 October 2023), with FP giving a dividend yield of 3.7%.
FP is now trading at a low price-to-book ratio of 0.3 times and sports a 5.5% dividend yield.
#4 UOL Group
UOL Group (UOL) is a Singapore-listed property group involved in the residential, commercial, and hospitality sectors. It manages around SG$22 billion of assets in 14 different countries.
Singapore continues to be the main contributor in revenue to UOL at 78% of revenue in 2022. Meanwhile, most of UOL's revenue is derived from property development at 62% of revenue, followed by hotels (17%) and property investments (16%).
For the 1H 2023, UOL's revenue has normalised to SG$1.4 billion from SG$1.7 billion in 2H 2022 as the Singaporean economy reverts to normalcy after a strong year in 2022. However, impressively, profits have actually grown by 21.4% to SG$230 million from SG$190 million over the same period.
Hence, UOL offers a competitive edge in the Singaporean property market:
- High return on asset
UOL generates a 1.9% return on assets compared to its peers' average of 1.6%.
- Recent good track record of gains on investment properties
UOL is in the process of disposing Parkroyal Kitchener Hotel to Midtown Properties for a price of SG$525 million. This implies a gain of SG$446 million.
- High proportion of recurring income
Recurring income here means that UOL generates consistent revenue and cash from its properties, which stabilises its cash flow. Its operating cash flows (before working capital changes) were steady at an average of SG$718 million per year.
Market analysts have UOL at an OVERWEIGHT investment call with an average target price of SG$7.89. In terms of valuation, UOL is trading at a price-to-book ratio of 0.5x and dishes a decent 2.4% dividend yield.
