Analysis of CapitaLand Commercial Trust

Current Price on 20th Jan 2015 = $1.31

• Yield = 6.63%  
• Price-to-book Ratio = 0.738
• Assets per unit = $2.235
• Debt per unit = $0.461 (including current liabilities)
• Gearing = 20.6%
• Secured NAV = $1.775 (135% of trading price)

CapitaLand Commercial Trust has reported their results which in my opinion is quite favourable given the fundamental shift from looking at Yield to looking at NAV. Here is the data.

Yield is at 6.63% which is hardly exciting but its NAV is a big plus. It has a price-to-book ratio of 0.738 which means we are buying at about 26% discount. Moreover, as their debts are all unsecured, it means that all properties are technically quite safe from being seized by banks. Thus, we have a secured NAV of $1.775 which is 135% of their current trading price. This means that if they liquidate all their properties and pay off all the debts, we get $1.775 back.

This doesn't mean that they will do that. They are the biggest Office REIT and it is very unlikely that they will be taken over. The purchaser will need a lot of money to do that. But the manager can choose to sell off some of their properties to realize the value of the investments and create true value for shareholders. One news report is already suggesting that.

We need some news and announcements that some REITs are doing just that to spur the activities of REITs so that their trading price is closer to their NAV. I believe once CCT announce the sale of one of their properties, price will go up. I am not vested though so just watching the news.