OCBC Investment Research Private Limited

25 April 2025

CapitaLand India Trust: Eyeing Growth with Strategic Acquisitions

Investment Thesis: CLINT’s Focus on India’s Growth Potential

• CapitaLand India Trust (CLINT) is highlighted as a pioneering property trust in Asia, concentrating on India’s burgeoning IT sector. [[1]]
• With 11 IT park clusters in major cities such as Mumbai, Hyderabad, Bangalore, and Chennai, CLINT is strategically positioned to benefit from India’s economic expansion. [[1]]
• The trust has diversified into logistics and industrials and is developing data centers (DCs), showcasing a forward-looking approach. [[1]]
• CLINT’s aggressive acquisition strategy, particularly through forward purchases, distinguishes it among Singapore-listed trusts and REITs. [[1]]
• The trust is expected to capitalize on tailwinds from e-commerce growth, increasing data localization, and the proliferation of digital payments. [[1]]-[[2]]
• The relaxation of the Special Economic Zones (SEZ) Act is anticipated to mitigate occupancy risks for existing SEZ properties. [[2]]

Financial Performance: Strong Operating Results Drive Growth

• CLINT reported a 12% year-on-year (YoY) increase in total property income and net property income (NPI) for 1Q25. [[1]]
• In local currency terms, the increase was 14%. [[2]]
• Total property income reached SGD74.6m and NPI was SGD55.1m, driven by higher rental income from existing properties and contributions from 2024 acquisitions. [[2]]
• These results constitute 22.5% of the initial full-year forecasts. [[2]]
• Committed occupancy remained stable at 92%, including options and rights of first refusal. [[2]]
• The portfolio experienced a +9% rental reversion over the past 12 months, particularly in Bangalore and Chennai. [[2]]

Strategic Developments: Divestments and Acquisitions

• The divestment of CyberVale and CyberPearl has been delayed until May 2025 due to ongoing market volatility. [[1]]-[[2]]
• Gearing rose to 41.5% as of 31 March 2025, due to debt drawdown for working capital and project funding, but is expected to fall below 40% post-divestment. [[2]]
• Cost of debt remained stable at 6%, with 84.5% on fixed rates, expected to continue into the next quarter. [[2]]
• In February 2025, CLINT announced a forward purchase agreement to acquire an office project (MAIA) in Bangalore. [[2]]
• CLINT will provide SGD156.4m in funding over four years, starting in 2H25, with the acquisition estimated at SGD233.6m upon completion in 2H28. [[2]]
• The acquisition is projected to increase FY24 DPU by 1.8% to 6.96 Singapore cents on a pro forma basis. [[2]]

Revised Fair Value Estimate: Adjusting for Economic Uncertainty

• The fair value (FV) estimate has been reduced to SGD1.23, factoring in several adjustments: [[1]]-[[2]]
• A steeper depreciation of INR vs SGD. [[2]]
• An increase in the cost of equity input from 9.38% to 9.8% to account for near-term macroeconomic uncertainty. [[2]]
• A reduction in the terminal growth rate assumption by 25bps to 2.5%. [[2]]
• The FY25 and FY26 DPU forecasts have been lowered by 3.6% and 4.9%, respectively, following the forward purchase agreement for MAIA. [[2]]
• Despite these adjustments, a BUY rating is maintained. [[2]]

ESG Performance: Leading in Green Building Initiatives

• CLINT maintained its ESG rating as of December 2024. [[2]]
• The trust is recognized for its green building initiatives, including green leases to promote sustainable property use. [[2]]-[[3]]
• 79.5% of CLINT’s total portfolio area was certified to green building standards in FY23, significantly above the industry average. [[3]]
• CLINT also outperforms peers in staff management practices, including grievance mechanisms, and has a majority-independent board. [[3]]

Potential Catalysts and Risks

• Potential Catalysts: [[3]]
• Developments on DC partial divestment. [[3]]
• Stronger-than-expected outsourcing demand. [[3]]
• Increasing tenant pick up through denotification of SEZ space. [[3]]
• Investment Risks: [[3]]
• Forward purchases failing to meet pre-agreed building specifications and inability of sellers to repay loans. [[3]]
• Delays in DC development and divestment plans. [[3]]
• Unexpected appreciation of SGD over INR. [[3]]

Valuation Analysis: Comparative Metrics

A valuation analysis comparing CAPITALAND INDIA TRUST (CAPC.SI) with its peers is presented:

Company Overview: CLINT’s Portfolio and Strategy

• CapitaLand India Trust, listed on the Singapore Stock Exchange since 2007, focuses on income-producing commercial real estate in India. [[4]]
• As of 31 December 2024, CLINT’s portfolio includes 11 IT parks, four data centre developments, and three logistics and industrial facilities. [[4]]
• These assets cover 19.6 million square feet across key Indian cities, valued at SGD3.4 billion. [[4]]
• CLINT is managed by CapitaLand India Trust Management Pte. Ltd., a subsidiary of CapitaLand Investment. [[4]]

FY24 Base Rents Breakdown

• By City (India): [[4]]
• Hyderabad: 27% [[4]]
• Bangalore: 27% [[4]]
• Chennai: 18% [[4]]
• Pune: 20% [[4]]
• Mumbai: 8% [[4]]
• By Tenant Sector: [[4]]
• Technology & Software Development: 61% [[4]]
• Electronics, Semiconductor & Engineering: 11% [[4]]
• Banking & Financial Services: 7% [[4]]
• Automobile: 6% [[4]]
• Others: 8% [[4]]
• Design, Gaming and Media: 3% [[4]]

Historical Financial Performance: NPI and Distribution per Unit

• Net Property Income (SGD m): [[4]]
  • FY2018: 128 [[4]]
  • FY2019: 136 [[4]]
  • FY2020: 148 [[4]]
  • FY2021: 156 [[4]]
  • FY2022: 167 [[4]]
  • FY2023: 180 [[4]]
  • FY2024: 206 [[4]]
• Distribution per unit (S cents): [[4]]
  • FY2018: 6.10 [[4]]
  • FY2019: 7.33 [[4]]
  • FY2020: 8.83 [[4]]
  • FY2021: 7.80 [[4]]
  • FY2022: 8.19 [[4]]
  • FY2023: 6.45 [[4]]
  • FY2024: 6.84 [[4]]

Detailed Financials: Income Statement Analysis

Key figures from the Income Statement (In Millions of SGD):

Profitability and Credit Ratios

Key profitability and credit ratios provide further insight into CLINT’s financial health:

Analyst Certification and Disclaimer

• The analyst(s) certify that the opinions in the report accurately reflect their views and that they have maintained independence and objectivity. [[6]]
• The analyst(s) and their connected persons do not hold financial interests in the listed entity. [[6]]
• The analyst(s) do not receive compensation related to specific recommendations in the report. [[6]]
• A detailed disclaimer outlines the purpose of the report, the limitations of the information provided, and potential conflicts of interest. [[6]]-[[7]]
• The report is for information purposes only and should not be construed as an offer or solicitation. [[6]]-[[7]]
• Investors are advised to seek advice from a financial adviser before making any investment decisions. [[6]]-[[7]]

Ratings and Recommendations

• OIR’s technical comments and recommendations are short-term and trading oriented. [[7]]
• OIR’s fundamental views and ratings (Buy, Hold, Sell) are medium-term calls within a 12-month investment horizon. [[7]]-[[8]]
• BUY rating indicates total expected returns (excluding dividends) in excess of 10% based on the current price. [[7]]-[[8]]
• HOLD rating indicates total expected returns (excluding dividends) within +10% and -5%. [[7]]-[[8]]
• SELL rating indicates total expected returns (excluding dividends) less than -5%. [[7]]-[[8]]