CapitaLand Investment - UOB Kay Hian 2022-02-10: High Margin & Steady Growth Via Multiple Platforms


CapitaLand Investment - High Margin & Steady Growth Via Multiple Platforms

  • We forecast a 39% earnings growth for CapitaLand Investment over the 2021-23 period driven by FUM growth and a normalisation of investment property earnings after the COVID-19 peak.
  • Compared with its regional and global peers, CapitaLand Investment’s valuations appear inexpensive with 2022 P/NAV and EV/EBITDA at 1.4x and 21.1x respectively.
  • Share price catalysts include cap rate compression and stronger-than-expected fund growth.

Exciting growth in CapitaLand Investment's fund management platform.

  • CapitaLand Investment (CLI, SGX:9CI) has > S$115b in AUM which makes it one of the largest real estate investment managers (REIM) in Asia. Of this, S$83b, or 72%, are funds under management (FUM) and the company has plans to grow this to over S$100b by 2023/24. We forecast FUM fee income to grow at a 14% CAGR over 2020-23.
  • In addition, CapitaLand Investment has > S$10b in assets that it will look to monetise in the next few years.

High EBITDA margin business.

  • CapitaLand Investment's fee income-related business contributed about 40% of revenue in 2020, supported by average EBITDA margins of 56% over the 2017-20 period. CapitaLand Investment has a strong and stable platform that generates fee income from its investment and asset management of listed REITs and unlisted funds, lodging management and property management across its asset classes.

One of Asia’s largest REIMs with coverage in over 240 cities and across more than 30 countries, with potential for exciting growth to continue.

  • Notably, more than 80% of CapitaLand Investment's AUM is concentrated in Asia, with Singapore, China forecast CapitaLand Investment will be able to achieve its target FUM of S$100b by 2024, implying a 6.4% CAGR over the 2020-24 period, supported by its leading listed REIM platform that manages six listed and more than 20 unlisted funds.

Proxy to reopening.

  • While there are other reopening plays after the COVID-19 peak, we believe that CapitaLand Investment is an excellent proxy as it has about 83% of its AUM in traditional real estate segments such as office, lodging and retail. Lodging in particular has seen a gradual recovery in the past 12 months given CapitaLand Investment’s exposure to long-stay assets, and as global travel resumes, should provide CapitaLand Investment with upside.
  • In addition, CapitaLand Investment has > S$1b in new logistics and data centre funds which it has successfully raised in the past 18 months.

Initiate coverage on CapitaLand Investment with BUY

Adrian LOH UOB Kay Hian Research | https://research.uobkayhian.com/ 2022-02-10
SGX Stock Analyst Report BUY INITIATE BUY 4.02 SAME 4.02