April 21

3 things I learnt about the CLINT CapitaLand India Trust share price from AGM 2023

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If you’ve read our content on investing before, you know we don’t like to pretend that we know the financial terms like the back of our hand.

CapitaLand India Trust share price
Just so you know we are not bluffing, we did buy CLINT at $1.43. And today, it is 26% down.

Instead, we focus on making good investment decisions, even if you don’t have the necessary financial knowledge.

So if you’re coming here looking for analyses on their discounted cashflows, their projected earnings, I’m sorry. I don’t have that.

And um… I don’t know how to do that.

But I do know that I was desperately thinking about whether I should drop CapitaLand India Trust, especially after the big drop in share price.

Here’s 3 things I found out from sitting in a cold room on a Monday afternoon, listening to management speak about their plans for CapitaLand India Trust.

Then I found myself in the freezing Raffles Hotel, listening to the board sharing about CLINT.
Then I found myself in the freezing Raffles Hotel, listening to the board sharing about CLINT.

Oh, not the share price again

Whenever you go for these AGMs, you would get unhappy shareholders complaining about the share price.

And they tend to appear at these AGMs because of the food.

No shame about that, it would have been nice too if CapitaLand had provided some food.

But they didn’t. Maybe it would have made these upset shareholders a little happier.

I happened to overhear shareholders trading the latest knowledge on which AGMs had food.

OCBC? DBS?

That’s your typical (hungry) Singaporean shareholder. Interested in the returns on food (and investment).

Back to the food. No, sorry.

I meant share price.

One shareholder complained about how his friend had bought into CapitaLand India Trust at $1.43, and how he had bought more when it steadily fell.

This doesn’t make for very nice reading.
This doesn’t make for very nice reading.

At $1.08 now, he asked the management if they could provide a good reason why his friend should continue to hold the shares.

Well… Chair of the Extraordinary General Meeting, Alan Nisbet replied that they didn’t have any control over how the market moved the share price.

But that they were doing their best to make acquisitions that were Assets Under Management and Distribution Per Unit – accretive.

In simple terms, they wanted to make sure that the things they bought would grow the returns to shareholders, in terms of the dividends paid out.

If you look at DPU, they have certainly grown.
If you look at DPU, they have certainly grown.

If you look at the amount of space they currently lease out, it has also grown.

So the question is,

Why hasn’t the share price grown?

It’s (still) a difficult market for REITs

With the current rising interest rates, making loans more expensive, and possibilities of a looming recessions, REITs just don’t seem that hot today, compared to a year ago.

But what we do need to ask ourselves as investors is whether CLINT is still a good REIT to buy, compared to others.

It’s not an easy answer, but my answer here is that CLINT, quantitatively, is still one of the best two REITs in Singapore.

Firstly, I like that it’s situated in a growing Indian market, where demand for IT services will grow.

But more importantly, as was pointed out quite a few times by the management, the growing trade tensions between US and China has prompted more suppliers to shift away from China in their manufacturing supply chain, to explore places like India.

One big win is Pegatron, who is the second largest iPhone manufacturer, who today uses their industrial facility.

But if you look at the returns on capital employed (ROCE), it’s one of the highest amongst its peers.

CapitaLand India Trust share price
Yes, we cheated. Because we didn’t know how to read financial accounts, we took information from Stockopedia to screen for the best stocks. That’s how we initially found CLINT too!

Shifting revenue mix away from 93% commercial

Sanjeev Dasgupta, the CEO of CLINT, reported that the current revenue mix between property income from commercial properties, and industrial properties was 93% to 7%.

I asked if he had a target for the revenue mix, seeing that CLINT was moving towards data centres and industrial properties.

Whilst he didn’t have a hard target, he mentioned that he would say it would split roughly between 75% commercial, 15% data centres, and 10% from industrial properties.

The current revenue mix, from Pg 60 of AR 2022
The current revenue mix, from Pg 60 of AR 2022

REITs can be a long game

But ultimately, whether or not you buy CLINT, or another REIT, or another stock, you yourself need to understand what role the stock will play in your portfolio.

There’s no point buying just because I told you you should ride on the India wave.

For me, REITs are a way to hedge against risk, and provide longer term visibility of income.

Capital appreciation (through share price rises) is not the focus.

Instead, the growing DPU, and the ability to not have drastic changes in the share price make the REIT like a bond, with a growing yield over the years, that (hopefully) outpaces inflation.

You thus see my three points of owning a REIT.

  1. A dividend that supplements your income every 6 months (I would be lying if I said the 200-odd dollars I get a month from dividends from various stocks haven’t been helpful)
  2. A share price that could hopefully grow over time
  3. A business in a growing industry (here, the CapitaLand India Trust is in a unique geography)

But ultimately, if you want to flip properties every year, CLINT may not be the right stock for you. Don’t even think of owning a REIT, because properties, as you know, are one of the more illiquid assets that can’t be moved as easily compared to technology.

 


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