Disproving naysayers
- Operating PATMI dipped 6.0% y-o-y, ahead of downbeat expectations
- Targets to double funds under management (“FUM”) to S$200bn in 5 years
- Lodging business roaring back; could present as key surprise for investors
- BUY call, TP adjusted to S$3.85 as we refine our TP pegs for its listed platforms.
CapitaLand Investment Limited (“CLI”) reported a 6.7% dip in operating PATMI to S$568m, slightly ahead of our projections of S$532m. Including portfolio gains of S$213m in FY23, cash PATMI (operating + portfolio) gains was similarly 6.0% lower to S$781m (-8.0% y-o-y). In line with previous guidance, CLI saw net loss in impairments and devaluations to the tune of -S$600m (vs +S$30m in FY22), driving a c.44% dip in EBITDA to S$1.104m (vs S$1,966m). Overall, while 2H23 went into a net loss position, CLI remained profitable in FY23 with an overall PATMI of S$181m, -79% y-o-y.
Financial metrics remained stable with steady net debt/equity of 0.56x (flat q-o-q) with ICR ratio of 3.8x (FY22: 4.7x). Given resilient cashflows, CLI announced a dividend of 12 scts / share, in line with projections.
Steadily growing fund management platform. CLI’s fund management platform (“FUM”) grew to S$100bn, including commitments, achieving its target of S$100bn by 2024. Close to 61% of its FUM is derived from the group’s listed REITs but a large part of the growth has been through its private fund platform in recent years. While CLI’s managed REITs returned steady growth in FUM (stable y-o-y) as acquisition activity remained subdued (net investment of c.S$700m (S$1.2bn investments against S$532m in divestments) due to high interest rate environment, the lower interest rates environment will make it more conducive for its listed REIT platforms to pursue growth initiatives.
The group raised 4 fund closings through 2023 with a new equity commitment of S$1.0bn, out of which 81% is raised from the funds’ capital partners. We understand that the private funds business has turned more productive with lower equity commitment levels of c.10%-20% for their newly launched funds compared to >30% for its funds with older vintages.
Looking ahead, the group has set a new ambitious target of S$200bn within 5 years and will look for bolt on acquisition opportunities to grow its FUM. The targets are expected to be delivered through a mix of organic and inorganic, with opportunities within the developed markets space to be most attractive for management.
