KGI: CapitaLand Investment (CLI SP) – Sets up first Chinese onshore fund amidst share buybacks ??
alanyeo
BUY Entry 3.85 – Target – 4.23 Stop Loss – 3.45
CapitaLand Investment Limited is a global real estate investment manager with a focus on Asia. Its real estate funds under management (“FUM”) is held via its managed listed funds and unlisted funds across the Asia-Pacific, Europe and the United States of America. The Group’s FUM is diversified across asset classes, namely, integrated developments, retail, office, lodging and new economy sectors such as business parks, industrial, logistics and data centres. The Group’s business model comprises two key segments, namely, fee income-related business and real estate investments.
Announced initial foray in China with RMB700m fund. CLI recently announced a 12%-stake in an RMB700m onshore China-based fund, in partnership with a local asset management fund. The fund’s maiden investment took advantage of the ongoing special situation in China, by acquiring a quality office building in Shanghai at an attractive but undisclosed price. The transaction is expected to be completed in July 2022. CLI is expecting this initial foray to further expand its private fund management business, which has since grown to S$1.9bn spread across 9 funds since 2021.
Share buybacks to support share price in the near and medium term. Since the approval of its share buyback mandate on 29 April, CLI has routinely carried out open market acquisitions of its shares. As at last update, CLI has bought back over 27.8m shares at between S$3.77 to S$3.85 apiece, providing share price support at those levels. CLI currently has about 89% of its buyback mandate remaining till next year, providing it with ample breathing room to acquire back more shares.
Growing dividends even as FY22F EPS projected to return to normalcy. The Street is overwhelmingly positive on CLI’s prospects with 17 BUYS, and only 1 HOLD, and a 12M TP of S$4.30. The street is expecting FY22F EPS to decline 34% YoY after a strong FY21A, which saw asset recycling efforts garner a record S$616m in portfolio gains. After returning to a more sustainable level in FY22F, the street is projecting 13% YoY growth in FY23F. At these projected levels, CLI would trade at 17.8x and 15.8x FY22/23 P/E respectively. Additionally, there are also expectations for increasing shareholder payouts, with FY22/23 dividends growing 7.5%/6.2% YoY to S$0.129/S$0.137, implying a yield of 3.4%/3.6% respectively.
