Multiple avenues to remain vested!
- Group remains a net investor; taking advantage of market dislocations to grow AUM
- Divestment target could be missed, but unlikely to be a dampener given sub-optimal returns for now
- Lodging portfolio remains robust with a firm uptrend
- BUY call maintained, TP S$4.25
Operational performance in line
CapitaLand investment Limit (CLI)’s performance YTD remains steady with total revenue coming in at S$2.0bn. Revenue from its fee income-related business rose by +9% y-o-y to c.S$800m, which partially offsets the dip in its real estate investment business (-8% to S$1.4bn). Revenues are tracking in line with our estimates, forming c.75% of our estimates. A large part of the revenue increase in fee income comes from lodging management fees on the back of a robust 25% rebound in RevPAR and key count while its overall (REIT management and private funds) fees remain resilient.
Our estimates are reflected to take into account potential fair value losses in FY23F and lower FX rates in FY24F.
What is our view?
The group is a net investor in 2023 with its private funds and selected REITs actively growing their portfolio while further opportunities for growth remain, given that close to S$10bn in funds is yet to be deployed. We view the launch of new private equity fund products (healthcare, datacentre, and private credit space) in the coming months as catalysts for a re-rating of the stock. While its divestment target of S$3.0bn could be missed, we see investors looking past that, given a more subdued liquidity environment indicates sub-optimal potential for returns. Maintain BUY, SOTP valuation of S$4.25.