Execution On Track
FY21 a strong beat, dividend upside surprise
CLI delivered a strong FY21, and positive surprises from a higher-than-expected dividend and divestment gains from SGD13.6b of assets sold at an average of 13% above book value. Growth in funds-under- management (FUM) and fee-related earnings (FRE) is tracking ahead, and we think funds AUM could exceed management’s FY24 target of SGD100b. CLI has re-rated meaningful since listing, and we think the strong maiden results and earnings momentum, sets it on the right trajectory. We see accelerating
FUM growth, expanding FRE, and faster conversion of on-balance sheet assets to FUM creating earnings upside risk. Our SGD4.30 SOTP-based TP sees 16% upside. BUY.
Recovering metrics, growth in fee income
CLI reported 2H21 PATMI of SGD647m (vs. a loss of SGD680m in 2H20), with FY21 PATMI of SGD1.3b (vs. -SDG559m in FY20), driven by improvement in investment properties under its real estate investment business (REIB), which delivered SGD2.2b in EBITDA (vs. -SGD225m in FY20) and 15% YoY higher fee income (fund management: +34% YoY, lodging management: +27% YoY, and property management: -7% YoY). Adjusting for portfolio gains (SGD616m) and revaluation gains/impairments (SGD236m), FY21
operating PATMI of SGD497m (+12% YoY) was behind our estimates due to one-off transaction costs.
FUM performance set to improve
FRE rose strongly at +34% YoY in FY21, from its REITs (+33% YoY) and private funds (+36% YoY). This was underpinned by 10% YoY growth in FUM to SGD86.2b, and event-driven fees (acquisitions/ divestments/ promotes) of SGD75m (vs. SGD21m in FY20). These were 18% of total FRE, and helped lift FRE/FUM ratio to 50bps (vs. 46bps/40bps in 9M21/FY20). CLI raised SGD1.4b in external capital with 7 funds incepted, with further launches of higher fee-generating funds in the pipeline expected to improve FUM performance, as management eyes opportunities in China, real estate credit, data centres, and renewable energy assets.
Stronger balance sheet, eyeing >10% ROE
NAV/share rose 10% YoY to SGD3.12, with net gearing improving to 48% from 62% in FY20. FY21 ROE was strong at 8.7%, against -3.8% in FY20, and set to rise, backed by growing fund and lodging management fees, further securitisation of on-balance sheet assets, and scaling down its share of capital in raising new FUM. CLI aims to maintain FY21’s 12cts normal dividend (including 3cts special), which suggests 40% payout as a baseline.