CapitaMall Trust

[Drizzt]

Compare CMT (FY2014) and FCT (FY Sep-2014) data:

1. FCT has higher DPU (11.187 cents versus 10.84 cents)
2. FCT has lower gearing (29.3% versus 33.8%)
3. FCT has higher interest cover (6.17x versus 4.5x)
4. FCT has lower cost of debt (2.508% versus 3.5%)
5. FCT has higher occupancy (98.9% versus 98.8%)

But looking at the prices today, CMT is $2.25 whereas FCT is $2.00. What is driving the preference for CMT

Hi egghead, the stock price of the company cannot be compared apple to apple. Appropriate measurements for stock within same industry would be PE ratio. However sonce both of mentioned are Reit/trust, a suitable simple measurement would be price to book ratio.

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i actually think his evaluation metrics are valid. no doubt some of them vary year to year.

price to book is a problematic evaluation considering valuation is subjective isn't it. think if this sponsor want to stuff this mall into the reit, so the valuation report is 'rigged' so that the mall looks good to stuff. valuation is also based on discount rate, which is another subjective measure.

[thor666]

Drizzt.. His other metrics are ok. Only the price comparison is challenging as it does not take into account the size of each trust, eg trust a is $1*100total shares, while trust b is $1.10*10000total shares.

As for pe or pb.. As you correctly identified, it can be manipulated to look good via various means. In depth study of each stock is required, and I am actually inclined to the idea that reits and trusts can be much more difficult to evaluate as compared to say, a company simply selling equipment

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[Drizzt]

Drizzt.. His other metrics are ok. Only the price comparison is challenging as it does not take into account the size of each trust, eg trust a is $1*100total shares, while trust b is $1.10*10000total shares.

As for pe or pb.. As you correctly identified, it can be manipulated to look good via various means. In depth study of each stock is required, and I am actually inclined to the idea that reits and trusts can be much more difficult to evaluate as compared to say, a company simply selling equipment

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ah fair enough. but the competency to build up to have an evaluation that makes a fundamentally sound decision is still much less than other form of listed businesses

[egghead]

Thanks all for your comments. I wonder if CF would consider moving a few of the above posts to FCT thread instead?

[swakoo]

The fact that CMT is more "blue chip" (i.e. bigger cap, being one of STI component, etc) did not escape me. Also, I forgot to mention that even on NAV per share basis, FCT is also higher than CMT. I am just wondering if the CMT premium over FCT is excessive.

Perhaps the puzzle can be examined by looking at US shopping mall reits. They trade well below 3% yields vs current implied yield of roughly 5% for CMT while there is only a slight difference in the respective 10 yr sovereign bond yields. Hence the "yield premium" (ignoring differences between the reits) is even more "excessive". How does this help shed light on the puzzle?

CMT is an STI component as you noted as well as an MSCI Singapore component, hence would probably have more attention from international investors than FCT. CMT may look "under valued" to these investors while FCT is just not on their radar.

Also wonder if you are aware that CMT's premium over FCT used to be as high as 3 to 4 % pts in years past declining to roughly 0.5 to 1 % pt in recent times. Even more "excessive" previously.

[swakoo]

And when REITS portfolio tenures drop to 40 years or less (around year 2050-2060), banks will not lend as much going by the metric of Loan to Value ratio, hence capital raising is the likely option.

I have the same aversion as you do to reits with short land tenures. However, many of the reits (esp industrial reits and reits with properties in China and Indonesia) own assets with land tenures much less than 40 years. They seem to not have trouble borrowing from banks.

The second trouble will be in 2085-2095 when they have to renew their leases.

You are a rare valuebuddy who looks out to what happens to your investment 70 to 80 years ahead, ie at age 90+ to 100+ and I really admire the foresightedness.

To Egghead: One minor point FCPT DPU was high because FCT distributed 100% of income available for distribution while CMT distributed 90%. If we are to pro rate to 90%, FCPT will be lower (10.068 vs 10.84).

What is cited is only for 1 quarter. Both reits retain and add back over their fiscal year. If you look at 4 quarters (which Egghead did), FCT's dpu is quite a touch higher.

[CY09]

Hi swakoo

Not sure about US reits, but one possible reason yields are low is because their properties are freehold while ours is predominantly leasehold

For China the property market is different, the govt gives land mainly on 30 to 60 year tenure, therefore how valuers do their valuation there will be different from how valuations are done in Sg and this in turn will affect the ltv ratio. To sum up,my comment on the 40 year issue is strictly for Singapore

For the comparison of fcpt and cmt distribution, I used both companies latest full year and fcpt was 100% distribution while cmt was about 90%. So my statement still stands

[egghead]

The second trouble will be in 2085-2095 when they have to renew their leases.

You are a rare valuebuddy who looks out to what happens to your investment 70 to 80 years ahead, ie at age 90+ to 100+ and I really admire the foresightedness.

I actually feel that it is impossible to look so far ahead. Who is to say shopping mall retailing will continue for another 20 years or be replaced with on-line shopping with better computing technology (e.g. virtual reality, etc)?

[CityFarmer]

Thanks all for your comments. I wonder if CF would consider moving a few of the above posts to FCT thread instead?

There are posts about FCT vs CMT, thus remain appropriate in this thread, IMO

Thank you

Regards
Moderator CF

[egghead]

Looks like Credit Suisse has the same opinion as I.

http://www.theedgemarkets.com/sg/article...dit-suisse

http://www.theedgemarkets.com/sg/article...dit-suisse