Broker: OCBC Investment Research
Date of Report: 14 August 2025

CapitaLand Investment Ltd: Sowing Seeds for Sustainable Growth and Recurring Income

Company Overview: A Leading Global Real Asset Manager

CapitaLand Investment Ltd (CLI), headquartered and listed in Singapore, stands as a prominent global real asset manager with a robust footprint in Asia. As of 31 December 2024, CLI managed approximately SGD136 billion in assets, with SGD117 billion in funds under management (FUM) through stakes in seven listed real estate investment trusts (REITs), business trusts, and a diverse suite of private vehicles targeting strategies around demographics, disruption, and digitalisation. CLI’s asset classes span retail, office, lodging, industrial, logistics, business parks, wellness, self-storage, data centres, private credit, and special opportunities.

The company is on a mission to scale its fund management, lodging management, and commercial management businesses globally, underpinned by effective capital management. As the investment arm of CapitaLand Group, CLI taps into an extensive development pipeline and celebrates 25 years of industry leadership in 2025. Sustainability is integral to CLI’s ethos, with a commitment to achieve Net Zero carbon emissions for Scope 1 and 2 by 2050.

Recent Performance: 1H25 Results and Business Developments

CLI’s first half of 2025 saw operating PATMI fall 12% year-on-year to SGD260 million, missing expectations. Revenue for 1H25 declined 24% to SGD1,040 million, mainly due to the deconsolidation of CapitaLand Ascott Trust (CLAS) and the lack of contributions from divested properties. Excluding these headwinds, revenue would have seen a 7% increase year-on-year.

• Real Estate Investment Business (REIB): Revenue (excluding CLAS) fell 5% to SGD548 million and is expected to decline further as CLI continues its asset-light transition via divestments. Over SGD500 million worth of China assets are earmarked for divestment.
• Fee Income-Related Business (FRB): This segment grew 1% to SGD564 million, with highlights in Listed Funds Management (+6%), Lodging Management (+4%), and Commercial Management (+1%), partially offset by a 9% decline in Private Funds Management due to lower one-off fees. This is expected to recover with contributions from new stakes in SC Capital Partners (SCCP) and Wingate.
• Group PATMI slipped 13% year-on-year to SGD287 million. Excluding portfolio gains, operating PATMI was down 12% at SGD260 million, forming 40% of the initial FY25 forecast. Management anticipates a stronger second half for 2025.

Strategic Initiatives and Growth Drivers

• Asset-Light Model: CLI continues to focus on recurring income streams by increasing FUM from SGD117 billion (as of 13 August 2025) to a target of SGD200 billion by 2028.
• Lodging Management: The segment earned SGD343 million in fee revenue for FY24, with a goal to exceed SGD500 million by 2028 through management and franchise contracts.
• Capital Recycling: After SGD5.5 billion in divestments in FY24, CLI is redeploying capital for growth, including mergers and acquisitions.

India as a Key Growth Market

CLI is accelerating its capital allocation in core markets, particularly India. On 12 August 2025, CLI signed a Memorandum of Understanding with the Maharashtra Government to invest over INR19,200 crore (~SGD2.8 billion) by 2030 in Mumbai and Pune. The company aims to raise its FUM in India from SGD8 billion to SGD15 billion by 2028, targeting business parks, data centres, logistics, and industrial parks.

Strong Balance Sheet and Capital Flexibility

CLI’s net gearing ratio rose from 0.39x to 0.46x as of 31 March 2025, but the company retains SGD3.3 billion and SGD6.0 billion in debt headroom before hitting net gearing ratios of 0.7x and 0.9x, respectively. Its implied interest cost is 4.0%, down 10bps quarter-on-quarter, and expected to fall further. This financial strength supports warehousing of assets before injecting them into listed and private fund vehicles, with infrastructure flagged as a new area of investment consideration.

Financial Highlights and Key Ratios

Valuation and Peer Comparison

ESG Initiatives: Sustainability and Governance Leadership

CLI’s ESG credentials continue to strengthen, with robust environmental standards and a target for green certification across all properties by 2030. As of FY22, 58% of CLI’s global portfolio (by square metres) was certified green. Investments in clean energy and energy efficiency technologies have placed CLI ahead of peers, and governance has been rated above industry averages thanks to a fully independent audit committee and strong corporate ethics policies.

Potential Catalysts and Investment Risks

• Divestment of assets at tighter-than-expected yields
• Faster-than-expected growth in fee income
• Potential boost in dividends per share

Investors should also be mindful of possible macroeconomic slowdowns, rising interest rates increasing borrowing costs, and potential disruption from pandemics.

Conclusion: Outlook and Recommendation

CLI remains firmly committed to its asset-light, recurring income strategy, with a strong balance sheet and clear growth ambitions, particularly in India and private credit markets. Despite a softer first half in 2025, the outlook for the second half is positive, supported by substantial capital headroom and ongoing expansion of fee-based segments.

OCBC Investment Research maintains a BUY rating for CapitaLand Investment Ltd, with a fair value of SGD3.69, reflecting a total expected return (excluding dividends) exceeding 10% from the current price. CLI’s ongoing transformation, disciplined capital management, and leadership in ESG set a solid foundation for sustainable, long-term growth.