CapitaLand Commercial Trust (SGX:C61U), a equity real estate investment trusts (reits) company based in Singapore, saw a decent share price growth in the teens level on the SGX over the last few months. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at C61U’s outlook and value based on the most recent financial data to see if the opportunity still exists. Check out our latest analysis for CapitaLand Commercial Trust
What’s the opportunity in C61U?
C61U appears to be overvalued by 91% at the moment, based on my discounted cash flow valuation. The stock is currently priced at SGD1.88 on the market compared to my intrinsic value of SGD0.98. Not the best news for investors looking to buy! Furthermore, C61U’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
Can we expect growth from C61U?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for C61U, at least in the near future.
What this means for you:
Are you a shareholder? If you believe C61U should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. Given the risk from a negative growth outlook, this could be the right time to reduce your total portfolio risk. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on C61U for some time, now may not be the best time to enter into the stock. Price climbed passed its true value, in addition to a risky future outlook. However, there are also other important factors which we haven’t considered today, such as the track record of its management. Should the price fall in the future, will you be well-informed enough to buy?