Ready for lift off
- FY21 PATMI ahead of expectations from robust portfolio gains from divestments
- Dividend hiked to 15 Scts a welcome surprise; resetting our dividend estimates higher in FY22-23F
- To focus on expanding its suite of Private Equity products in 2022 to capitalise on opportunities
- Lodging business ready to take off as borders re-open
Investment Thesis:
Maintain BUY, TP: S$4.00 implies 10% total returns. We maintain BUY on CapitaLand Investment Limited (“CLI”) with a target price of S$4.00, pegged to its sum of the parts valuation. Catalysts that we see emerging are (i) launch of new fund products and REIT acquisitions, with an aim to grow funds under management (FUM) to S$100 billion by 2024, up 19% from 2021; and (ii) rebound in operational performance at its lodging business. These are expected to drive 3-year net profit CAGR by 12% during FY21-24F.
Leading Asian real estate manager with ability to acquire across business cycles. CLI is an asset and capital efficient company with scalable fee-related earnings (“FRE”) and Fund AUM (“FUM”) platforms for growth. CLI’s private funds and REITs complement each other in terms of acquisition strategy. With diverse real estate strategies ranging from opportunistic, value-add to core investments, we see CLI leveraging on opportunities during market upcycles and downcycles. Its REITs and private funds can be active across all real estate cycles.
Lodging business roaring back to profitability. Ascott Limited’s global footprint is well placed to leverage on multi-year recovery of the hospitality sector in coming years. On top of robust growth in its operational footprint to 160,000 units by 2023, we see a turnaround in cashflows, as reopening of international borders is expected to drive the lodging business back to profitability.
Valuation:
Our valuation is based on sum-of-the-parts of CLI’s various businesses. We derive a target price of S$4.00.
Where we differ:
Our estimates are more conservative than consensus
Key Risks to Our View:
Falling capital values and inability to grow FUM.