Broker: UOB Kay Hian
Date of Report: 15 August 2025

CapitaLand Investment Ltd: Strategic Growth, Lodging Expansion, and Asset Recycling Poised to Drive 2025 Performance

Overview: CapitaLand Investment’s Global Real Estate Platform

CapitaLand Investment Ltd (CLI), a leading global real estate manager with a strong Asian presence, stands out for its diversified portfolio across retail, office, lodging, and new economy asset classes. Despite a softer first half in 2025, the company’s execution on core strategies, capital recycling, and lodging business expansion signal a robust outlook for the year ahead.

Stock Snapshot

• Share Price: S\$2.72
• Target Price: S\$3.49 (Raised from S\$3.42)
• Upside: 28.3%
• Market Cap: S\$13.57 billion (US\$10.59 billion)
• Shares Issued: 4,987.5 million
• Major Shareholder: Temasek Holdings (52.8%)
• FY25 NAV/Share: S\$2.58
• FY25 Net Debt/Share: S\$0.76
• Dividend Yield (2025F): 4.4% (DPS S\$0.12)

Headline Financials: 1H25 Results and Performance Highlights

CLI reported a 24% decline in 1H25 revenue to S\$1.04 billion and a 13% decrease in PATMI to S\$287 million, representing 41% of full-year estimates. Despite weaker headline figures, management emphasized strong execution, with S\$3.1 billion in transactions (up 15x year-on-year) and S\$2.1 billion in capital raised (up 67% year-on-year). The decline in revenue mainly stemmed from the deconsolidation of CapitaLand Ascendas REIT following a 4.9% stake sell-down in December 2024.

Key Financial Table

Management’s Strategy: Upbeat Tone and Clear Growth Levers

• Fund Launches and Capital Raising: CLI targets fee-related earnings (FRE) growth through new fund launches, expanding its private platform, and continued capital raising.
• Active Capital Recycling: Management plans to accelerate divestments of non-core assets in 2H25, redeploying proceeds into higher-yielding, scalable opportunities.
• Development Pipeline: CLI maintains an active pipeline valued at S\$3.5 billion across Singapore, China, and India, including asset enhancement initiatives in retail and office, expected to deliver 8-12% ROI.

Segment Analysis: Deep Dive Into Earnings Drivers

Real Estate Investment Business (REIB)

• REIB remains a cornerstone of CLI’s earnings, performing ahead of expectations in 1H25 despite significant divestments over the past year, such as Ion Orchard.
• CLI successfully redeployed divestment proceeds, minimizing earnings gaps and demonstrating strong capital management.

Fee Related Earnings (FRE)

• FRE operating PATMI declined 7% year-on-year to S\$162 million, reflecting lower transaction and performance fees, higher operating expenses, and adverse forex movements.
• CLI’s funds under management (FUM) stand at S\$116 billion, positioning FRE as a key pillar for asset-light growth.
• “Liberation Day” in the real estate sector saw softer transaction volumes, impacting fee generation compared to 1H24.

Lodging Business: Robust Expansion and Resort Management

• Lodging posted 5% RevPAU growth in 1H25, with higher occupancy (+2ppt) and a 1% increase in average daily rates.
• Singapore and China were drags, with RevPAU down 4% and 2% year-on-year, respectively.
• Platform growth accelerated: 9,400 units signed across 43 properties in the seven months to July 2025, with around 4,000 units opened in 24 properties.
• CLI is expanding into resort management with 50 properties, a segment with higher margins than city-based serviced apartments.
• Lodging business leverages 14 brands and a loyalty base of 7 million members, targeting 15 million over the medium to long term.

CapitaLand Commercial C-REIT (CREIT): Major Milestone

• CREIT listing remains on track. CLI’s subsidiary, CapitaLand Mall Asia, will sponsor the listing, seeding it with two assets (CapitaMall Sky+ in Guangzhou and CapitaMall Yuhuating in Changsha) valued at RMB 2.8 billion.
• Post-listing, CLI will retain a 20% stake, aiming to establish a perpetual onshore fund platform with renminbi assets and broader domestic reach.

Financial Forecasts, Valuations, and Key Metrics

Forecast Earnings Revisions

CLI has revised 2025–2027 earnings estimates down by 2–8%, primarily due to:

• Lower real estate investment business forecasts
• 2–3ppt lower EBITDA margins in fund and property management segments

Sum-of-the-Parts (SOTP) Valuation

Key Metrics and Outlook

• Net margin set to improve from 17.1% (2024) to 31.4% by 2027
• ROE forecast to rise from 3.4% (2024) to 5.8% (2027)
• EBITDA margin expected to expand from 28.5% (2024) to 47.6% (2027)
• Net debt-to-equity to decrease from 29.3% (2024) to 23.6% (2027)
• Interest cover ratio to increase from 1.6x (2024) to 6.2x (2027)

Cash Flow and Balance Sheet Strength

• Operating cash flows are expected to remain robust, with net cash inflow turning positive from 2026 onward.
• Capex is projected at S\$200 million annually from 2025 to 2027.
• Dividend payments are sustained at S\$802 million per year, supporting a 4.4% yield.
• Debt levels are expected to trend down, reflecting disciplined capital management and enhanced financial flexibility.

Valuation, Risks, and Share Price Catalysts

• BUY maintained with a higher target price of S\$3.49, reflecting improved sector multiples and confidence in CLI’s asset recycling momentum.
• P/B valuation of 1.0x for 2026 remains attractive compared to the 2023 peak of 1.4x.
• Share buybacks are not expected in the near-to-medium term, but management is confident in maintaining the minimum DPS at S\$0.12 for 2025.

Potential Catalysts

• Stronger-than-expected growth in funds under management (FUM)
• Successful listing of CREIT within the next four months
• Global interest rate cuts, which would support asset recycling and valuation uplifts

Conclusion: CLI Well-Positioned for a Strong Second Half of 2025

Despite softer headline numbers in the first half, CapitaLand Investment Ltd is executing strongly on its strategic roadmap. With capital recycling set to accelerate, a robust lodging pipeline, and a landmark REIT listing on the horizon, CLI offers investors a compelling blend of defensive yield, growth, and upside potential. The company’s disciplined financial management, diversified business model, and clear commitment to shareholder returns underscore its attractiveness amid a dynamic real estate landscape.