1H performance supported by fee income
- 1H operating PATMI of S$346m was in line at 49% of our FY22F forecast.
- Operating PATMI bolstered by higher fee income.
- Reiterate Add rating with TP of S$4.59.
1H22 results highlights
CLI reported revenue of S$1.35bn, +29.1% yoy, in 1H22, boosted by higher contributions from fee-related and real estate investment businesses. Reported PATMI declined 38.3% yoy to S$433m due to lower portfolio gains, rental rebates extended to China retail tenants and income vacuum from divested assets. Excluding portfolio gains, operating PATMI came in at S$346m, +31.1% yoy. CLI’s balance sheet remains robust, with net gearing of 0.51x at end-1H.
FRB income lifted by higher fees from listed and private funds
Fee-related (FRB) revenue grew 20.8% yoy in 1H22 to S$238m, led by higher fees from listed funds as well as increased event-driven income from private funds. Fee to fund rate stands at 52bp, unchanged qoq. Looking ahead, CLI indicated that it has some S$3.5bn of embedded FUM from committed and undeployed capital for private funds. CLI’s FUM remained flat qoq at S$86bn. CLI has divested S$1.6bn and made S$2.5bn worth of investments to date. Despite the slower investment environment amid global macro uncertainty and rising interest rates, CLI indicated that it could achieve its S$3bn asset recycling target for the year. Its aim to reach S$100bn of FUM by 2024F remains unchanged.
Growing units under management on track
Lodging management segment posted a 37% increase in fee income to S$118m, thanks to a rebound in global travel and a 44% jump in portfolio RevPAU, largely in Europe as well as in India, Singapore, South Korea, Malaysia and Indonesia. CLI continues to grow its units under management and recent acquisition of the Oakwood Worldwide platform has boosted units under management to 153k units and appears on track to meet its 2023F target of 160k units. This will underpin growth of the lodging management income.
REIB impacted by tenant rebates in China
Revenue from real estate investment business (REIB) rose 44.1% yoy to S$967m, due to recovery of CLI’s lodging RevPAU amid easing of global travel restrictions as well as contributions from newly acquired data centres, business park and student accommodation properties in China, USA and Japan. However, operating PATMI from REIB declined 9% yoy due to income vacuum from divested assets and rental rebates extended to its retail tenants in China. Management indicated that China’s ongoing deleveraging presents a potential window to access investment opportunities driven by special situations and market dislocation, and it remains on the lookout for attractive new economy projects.
Reiterate Add rating
We leave our FY22-24F EPS unchanged and maintain our RNAV-based TP of S$4.59. We believe that as CLI continues to lighten its balance sheet and accelerate the growth of its fee income business, there is room for a further re-rating of the valuation of its fund management business. Key downside risks include slower-than-expected scaling up of its funds under management (FUM) or dampened real estate outlook that could weaken its fund performance and hamper the pace of its capital recycling activities.