CapitaLand and CityDev: Which is the Better Investment? (Part 1)

Photo: Singapore cityscape


  • CapitaLand Limited and City Developments Limited (2 largest property developers listed in Singapore) are much followed tickers.
  • In this series of articles, I will endeavour to explain in simple terms how to value these firms.
  • I will then provide my view on which is the better investment in the medium to long term.
  • The first article in this series will focus on financial ratios.

A little business summary on both companies:-

CapitaLand Limited (SGX:C31) is a real estate company. Its primary activities are related to investment holding and consultancy services. The principal activities of the Company’s subsidiaries are those relating to investment holding, real estate development, investment in real estate financial products and real estate assets, investment advisory and management services, as well as management of serviced residences. The Company’s real estate portfolio includes integrated developments, shopping malls, serviced residences, offices and homes. The Company is also a real estate fund manager in Asia where its two core markets are Singapore and China. As at time of writing, its NAV stands at $3.02, PE: 12.60, Pb: 0.73, Yield: 2.97% and market capitalization of $12,951.38 million.

City Developments Limited (SGX:C09) is engaged in property development, ownership and investment holding. The Company provides real estate development and investment, hotel ownership and management, facilities management and the provision of hospitality solutions. Its subsidiaries are engaged in property development, which develops and purchases properties for sale, hotel operations, which owns and manage hotels; rental properties, which develops and purchases investment properties for lease, and others, which offers club operations and ownership, investment in shares property management, project management and consultancy services, and information technology and procurement services. As at time of writing, its NAV stands at $8.25, PE: 10.19, PE: 0.87, Yield: 1.45% and market capitalization of $7,510.83 million.


Value Investing Principles

The essence of value investing is the process of identifying companies that are fundamentally and financially sound, but whose stock is trading substantially below the genuine, intrinsic value of company shares. This is definitely not the same as buying cheap stocks.

Debt-to-equity ratio = Long Term Debt / Equity

Debt-to-equity ratio of CapitaLand and CityDev

Of course, being a value investor means that we want to avoid companies whose debt burdens can appear problematic, and this can be revealed by their DE ratio. From the table, we can see that CapitaLand and CityDev both have improved and relatively low DE ratios over the past two years. With a DE ratio of 0.812, CityDev is still considered to pose less investment risks and offers more financial stability than CapitaLand which has a DE ratio of 0.887 and is more vulnerable to downturns in the business cycle. The below graph reiterates how CapitaLand is often a worse performer than CityDev during business downturns and does performs better when the economy is good.

Relative changes in share prices of CapitaLand (green) and CityDev (blue) over the past five years. Source: Yahoo Finance.
Relative changes in share prices of CapitaLand (green) and CityDev (blue) over the past five years. Source: Yahoo Finance.

Current Ratio = Current Assets / Current Liabilities

Current ratio of CapitaLand and CityDev

Working Capital = Current Assets – Current Liabilities

Working capital of CapitaLand and CityDev

While both CapitaLand and CityDev exhibited a high current ratio of 1.82 and 2.84 respectively which implies that both companies have sufficient resources to repay their short-term debts, we can’t help but notice that with CityDev exhibiting a higher current ratio, it does seem to indicate that they may be more financially capable of repaying their debts. A higher amount of working capital from CityDev proves this even further.

Gross Profit Margin = Sales Revenue – COGS / Sales Revenue *100%

Gross Profit Margin of CapitaLand and CityDev

Net Profit Margin = Net Income / Sales Revenue *100%

Net Profit Margin of CapitaLand and CityDev

Although CityDev has a higher gross profit margin of 50.12% which indicates their ability to operate a lower cost on a higher assembly of goods, their net profit margin fell drastically to 26.21%, suggesting their significantly high amount of expenses. Conversely, CapitaLand was able to exhibit an even higher net profit margin of 31.40% as compared to their gross profit margin of 30.98% which suggests that they are able to translate revenue into profit which is ideal for shareholders.

Cash Adequacy Ratio = Cash from Operating Activities / (Capital Expenditure + Dividends Paid)

Cash Adequacy ratio of CapitaLand and CityDev

Free cash flows = Cash from Operating Activities – Capital Expenditure

Free cash flows ratio of CapitaLand and CityDev

Moving on to cash flows, a higher cash adequacy ratio from CapitaLand indicates that it has more than twice the capability of reinvesting in operations. While CapitaLand may appear to be financially weaker from the previous ratios, their capability was further reinforced when their ability to generate free cash flows despite paying high dividends was so much higher than CityDev even for both years.


Since value investors are known to identify companies with minimal debt, plenty of operating capital, solid cash flow and profit margins, all for the sake of understanding whether the company is able to withstand temporary economic or industry downturns, now that we have covered the financial ratios needed to examine both companies’ financial statements, what will be your pick thus far?

We’ll delve into further analysis and interpretation of these financial statements soon.


Disclosure: I do not have any positions in any CapitaLand and CityDev stocks at time of writing and have no plans to initiate any positions within the next 72 hours. I wrote this article myself and the calculations made are my own and are not intended as investment advice. I am not receiving any paid compensation for it and I have also no business relations with any company whose stock is mentioned in this article.


CapitaLand Limited Annual Report 2015.

City Developments Limited Annual Report 2015.

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