CGS International
May 1, 2025

Capitaland Investment (CLI): Strong Recurring Income and Strategic Growth Position Singapore Giant for Upside

Overview: Solid Start to 2025 for Capitaland Investment

Capitaland Investment (CLI), a leading Singapore-based property development and investment company, delivered a robust update for 1Q25, reinforcing its position as a defensive and growth-oriented real estate player. The company posted 1Q25 revenue of S\$496 million, representing 23% of full-year forecasts. Despite a headline year-on-year revenue drop of 23.7% due to the deconsolidation of Capitaland Ascott Trust, underlying revenues remained stable, reflecting resilient fundamentals.
CLI’s fee income-related business (FRB) was the key driver, growing 3% year-on-year to S$281 million and accounting for 57% of revenue. Real estate investment business (REIB) revenue fell 6% on a like-for-like basis, impacted by asset divestments. The company’s net debt-to-equity ratio declined to 0.39x at the end of 1Q25, highlighting strong financial discipline.

Key Highlights: Strategic Growth and Capital Recycling

– CLI is focused on growth thematics: logistics, self-storage, living and wellness, private credit, and data centres. – The group is leveraging partnerships (notably with SC Capital Partners and Wingate) to scale fund management (FUM) and optimize equity. – Active cost rationalization is underway, with ongoing recycling of on-balance sheet assets and right-sizing of fund stakes.

1Q25 Segment Performance: Fee Income Drives Growth

• FRB revenue rose 3% YoY, driven by:
  • Listed funds management (+3%)
  • Lodging management (+2%)
  • Commercial management (+4%)
• Fund fees averaged 46 basis points. FUM stood at S\$117 billion at end-1Q25.
• CLI invested approximately S\$1.5 billion year-to-date, with 30% via listed funds.
• In April 2025, CLI announced the launch of the first international-sponsored China REIT, focused on retail properties in China. CLI, Capitaland China Trust (CLCT), and Capitaland Development (CLD) will jointly hold a 20% strategic stake, creating a new platform for capital recycling and FUM growth.

Real Estate Investment Business (REIB): Impact of Asset Divestments

• REIB revenue fell 6% YoY due to the sale of 16 US multifamily properties and Ascendas iHub Suzhou.
• Lodging management saw a 5% YoY rise in RevPAU, led by strong performance in Japan, South Korea, and Europe, alongside the opening of 1,800 new properties.
• CLI’s on-balance sheet assets stood at S\$4.3 billion at end-1Q25, with 75% in China and the rest diversified across Europe, USA, Southeast Asia, and India.

Investment Thesis: Add Rating Maintained, Strong Upside Potential

CGS International reiterates its Add rating and maintains a target price of S\$4.30, based on a 10% discount to the firm’s RNAV (S\$4.78 per share). CLI’s asset-light fund management model, significant recurring income, and commitment to capital recycling underpin the investment thesis. Key re-rating catalysts include:

• Accelerated growth in FUM to drive fee income and ROE
• Faster-than-expected balance sheet reduction to boost returns

Potential risks include a weaker real estate outlook that could slow capital recycling, and a prolonged high interest rate environment that may compress investment returns.

CLI Financial Summary (S\$ million)

Peer Comparison: Singapore Developers

RNAV Breakdown: Investment Properties and Fund Management Business

CLI’s RNAV stands at S\$23,832.2 million, equating to S\$4.78 per share. Major investment property and lodging asset exposures include:

• Singapore: S\$287.0m
• China: S\$2,325.2m
• Malaysia: S\$407.1m
• Lodging: S\$1,525.5m
• Stakes in listed REITs: S\$8,032.4m
• Stakes in unlisted funds: S\$4,098.1m
• Value of fund management business: S\$6,873.9m

ESG Commitment: Sustainability at the Core

CLI scored B+ overall in LSEG’s 2023 ESG rankings, with Environmental at B-, Social at B+, and Governance at A. Notable highlights:

• Adoption of Capitaland Group’s 2030 Sustainability Master Plan, targeting net zero carbon by 2050 and a 46% reduction in Scope 1 and 2 emissions by 2030.
• Targeting 100% green-rated properties by 2030; currently, 58% of the portfolio has green certification.
• Secured S\$16.1 billion in sustainable finance between 2018-2023.
• Social targets include at least 40% female senior management representation and a strong focus on employee wellness and governance.
• Scores high for management (A+), product responsibility (A-), workforce (A-), and CSR strategies (A+).

Areas for improvement include environmental innovation and community engagement, but ongoing initiatives are expected to enhance rankings further.

Financials: By the Numbers

• Operating EBITDA margin is projected to rise from 34.2% (2023A) to 42.6% (2027F).
• ROIC is forecast to grow from 35.6% (2023A) to 36.5% (2027F).
• Net cash per share is projected to decline, reflecting ongoing capital deployment and asset recycling.
• CLI maintains a stable dividend payout ratio, with a forecasted 4.36% yield through 2027.

Conclusion: CLI Positioned for Resilient, Sustainable Growth

CLI’s results and outlook underscore its transition to a fee-driven, asset-light business model, supported by prudent financial management, strong recurring income, and a commitment to sustainable growth. The company’s clear strategic direction, robust balance sheet, and ongoing capital recycling initiatives make it a compelling choice for investors seeking both stability and upside in Singapore’s real estate sector.
With a significant discount to RNAV and strong ESG credentials, CLI stands out as a top pick among Singapore-listed property developers. The Add rating and S$4.30 target price reflect a high conviction in the group’s ability to deliver sustainable returns and navigate evolving market conditions with agility.