CapitaLand Investment Ltd (CLI SP) Analysis

Broker: Maybank Research Pte Ltd

Date: February 28, 2025

Overview

CapitaLand Investment Ltd (CLI) is one of the largest real estate investment managers globally, with a strong presence in Asia Pacific. The company’s financial performance for FY24 exhibited significant growth driven by lower revaluation losses and effective capital recycling strategies.

Financial Highlights

For FY24, CapitaLand reported a Profit After Tax and Minority Interests (PATMI) of SGD 479 million, marking a remarkable 165% increase year-on-year. However, operating PATMI fell by 10% YoY, aligning with market estimates. The company’s revenue rose by 1% YoY to SGD 2.815 billion, primarily fueled by a 9% growth in fee-related businesses, particularly in fund management, lodging management, and commercial property management.

Key Business Segments

CapitaLand’s performance is bolstered by its diverse business pillars:

. **Fees-Related Businesses**: This segment grew by a high single-digit percentage, with fund management fees increasing by 7%, lodging management fees by 4%, and commercial property management by an impressive 17%. Notably, the average fund balances remained stable, while lodging revenue per available unit (RevPAU) saw a 6% increase YoY.

. **EBITDA and Profitability**: The EBITDA margin for the fees business remained unchanged at 37%, with the EBITDA from on-balance-sheet businesses showing stability.

Capital Deployment and Growth Strategy

CLI has strategically divested SGD 5.5 billion, reducing its balance sheet stakes significantly. Approximately SGD 6 billion has been redirected towards mergers and acquisitions, including the purchase of 40% of SC Capital and Wingate. The total funds under management (FUM) increased by 20% YoY to SGD 117 billion, showcasing CLI’s robust capital recycling and deconsolidation strategies.

Management has indicated a capital deployment range of SGD 4.5 billion to SGD 7.4 billion for future growth through balance sheet re-gearing, focusing on asset warehousing, M&A, and seed capital.

Dividend Policy

The cash dividend for FY24 remained unchanged, complemented by an in-specie dividend of CICT SP units. The payout ratio has been adjusted to 50% from 30% of cash PATMI, with management reiterating its capacity to maintain a cash dividend of SGD 0.12, averaging 80% of cash PATMI over the past three years.

Investment Recommendation

The analyst maintains a “BUY” recommendation for CapitaLand Investment, citing reasonable valuation metrics of 0.9x net tangible assets and a cash dividend yield of 4.6%. The target price remains at SGD 3.30, reflecting a potential upside of 26%.

The analysis further emphasizes that CLI continues to trade near its net tangible book value, with promising growth prospects as the policy environment in China appears to be shifting favorably.

Risks to Consider

The report outlines several risks, including potential markdowns of asset values, a slower pace in fund-raising and transaction activities, a slowdown in global travel, and high funding costs. Additionally, aggressive growth through mergers and acquisitions poses execution risks.

Conclusion

CapitaLand Investment’s strategic positioning and focus on growth, coupled with its diversified revenue streams and robust capital management, make it a compelling investment opportunity in the real estate sector. The company’s sound financial health and growth potential affirm the “BUY” recommendation from analysts.