CAPITALAND INVESTMENT LIMITED (SGX:9CI)
CapitaLand Investment - Forging A New Growth Path; Initiate At BUY
- CapitaLand Investment (SGX:9CI) has emerged from CapitaLand’s restructuring, and having abandoned its traditional real estate developer model, now ranks amongst the largest listed real estate investment managers (REIMs) globally with S$120.8b of assets-under-management (AUM).
- CapitaLand Investment (SGX:9CI)’s funds-under-management (FUM) is 22% of FY22E EBITDA and 19% of our valuation, and we see significant room for earnings upside and multiple expansion, as it drives FUM growth, improves capital efficiency, and builds up fund performance track record.
Strong base to accelerate FUM growth
- We view CapitaLand Investment (SGX:9CI) as well-placed to drive FUM growth from S$84.3b to S$100b by FY24E, backed by an entrenched REIT management platform, global reach of private capital partners, and access to CapitaLand’s assets via a right-of-first-refusal (ROFR) agreement.
- Investment properties on balance sheet at ~S$10b set to be monetised in 3-4 years, will provide visible pipeline opportunities for its REITs and private funds. We project FUM fee income to rise at a +18% CAGR through FY23E, and forecast a +42% 3-year operating PATMI CAGR, underpinned by accelerated third-party fund-raising, and recovery in its lodging business alongside a global reopening.
Closing gaps with REIM peers
- We see scope for CapitaLand Investment (SGX:9CI) to narrow the performance gap of its private equity fund management business with peers, as it focuses on:
- growing new economy exposure (now at ~20% of AUM), some through Ascendas REIT (SGX:A17U), with headway from ~S$1.4b of new logistics and datacentres funds raised in the past 18 months,
- streamlining its balance sheet by reducing stakes in directly-held properties and funds, and
- driving higher FUM fee rate, by supplementing its funds management platform with more profitable fund products that are gaining relevance with investors.
Compelling valuation, room for multiple expansion
- CapitaLand Investment (SGX:9CI)’s current valuation is compelling, given its sharpened focus to drive growth in FUM and fee income contribution. Our target price implied FY22 of 1.25x P/B is justified by ROE improving to 10% by FY23E versus 6% on average in the past three years.
- We see catalysts in FUM growth, effective capital redeployment and operational improvement. Risks are slow scaling up of FUM, poor fund performance, competition, sharper-than-expected rise in interest rates, and weak real estate outlook.
- See
- See attached 35-page report for complete analysis on CapitaLand Investment (SGX:9CI).
- We initiate coverage on CapitaLand Investment (SGX:9CI) at BUY, with a sum-of-the-parts (SOTP) based target price of S$4.30. We see valuation at 1.1x P/B and 13x FY22E EV/EBITDA as attractive, versus the average 2.7x P/B and 26x EV/EBITDA for global peers.
Chua Su Tye
Maybank Research
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https://www.maybank-ke.com.sg/
2022-02-09
SGX Stock
Analyst Report
4.30
SAME
4.30
