See why CapitaLand is rapidly snapping up serviced residences

Bigger scale means bigger competitive advantage.

According to OCBC Investment Research, CapitaLand Ascott Limited has bagged multiplecontracts to manage serviced residence in the Philippines, China and Saudi Arabia.

The research firm said CapitaLand's international serviced residence business has already grown into the largest in the world, and these further expansions in its portfolio will only urther increase its competitive advantage.

Here's more from OCBC:

Secures eight management contract in Philippines. CapitaLand (CAPL) announced yesterday that it has secured a contract to manage a serviced residence in Alabang, a major business district in Metro Manila, Philippines. The 150-unit Somerset Alabang Manila is expected to open in 2017 and will be The Ascott Ltd’s (Ascott) eighth property in the Philippines.

Rapidly expanding serviced residence presence. Over the last month, we note the Ascott Limited secured two management contracts in Wuxi, China (the 134-unit Ascott Central Wuxi and 169-unit Somerset Wuxi), one contract in Riyadh, Saudi Arabia (the 230-unit Ascott Olaya Riyadh) and two in Jeddah, Saudi Arabia (the 166-unit Citadines Tahlia Jeddah and 136-unit Citadines Al Salamah Jeddah). This carries on a track record of robust growth for CAPL’s serviced residence business where the number of owned/managed units has grown at a CAGR of 13% since 2000; Ascott is now the world’s largest international serviced residence owner-operator with 31,770 units in 78 cities as at end 1Q13. Over 1Q13, overall portfolio REVPAU remained stable at S$109, with China, Europe and the Gulf region and India up 4%, 2% and 2% YoY, respectively.

Pipeline for growing Ascott REIT. We see the continued growth of CAPL’s serviced residence business extending its competitive edge in terms of scale and branding. With about S$0.9b of assets under development (on an effective stake basis), Ascott enjoys a good pipeline for capital recycling and growing the Ascott REIT ahead. The group recently divested three Chinese properties and 11 Japan properties to the Reit with a gain of S$15m and the transaction is expected to complete in 2Q13.

Maintain BUY. We continue to favor CapitaLand for its diversified real estate portfolio across asset classes, its strong balance sheet and renewed management focus on improving shareholder ROE. Maintain BUY with an unchanged fair value estimate of S$4.29 (20% discount to RNAV).