CapitaLand Investment - Maybank Research 2022-02-28: Execution On Track

CAPITALAND INVESTMENT LIMITED (SGX:9CI)

CapitaLand Investment - Execution On Track

CapitaLand Investment (SGX:9CI) delivered a strong FY21, and positive surprises from a higher-than-expected dividend and divestment gains from S$13.6b of assets sold at an average of 13% above book value.
Growth in funds-under-management (FUM) and fee-related earnings (FRE) is tracking ahead, and we think funds AUM could exceed management’s FY24 target of S$100b.

CapitaLand Investment has re-rated meaningful since listing, and we think the strong maiden results and earnings momentum, sets it on the right trajectory. We see accelerating FUM growth, expanding FRE, and faster conversion of on-balance sheet assets to FUM creating earnings upside risk.
Our S$4.30 SOTP-based target price for CapitaLand Investment sees 16% upside. BUY.

CapitaLand Investment reported 2H21 PATMI of S$647m (vs. a loss of S$680m in 2H20), with FY21 PATMI of S$1.3b (vs. -SDG559m in FY20), driven by improvement in investment properties under its real estate investment business (REIB), which delivered S$2.2b in EBITDA (vs. -S$225m in FY20) and 15% y-o-y higher fee income (fund management: +34% y-o-y, lodging management: +27% y-o-y, and property management: -7% y-o-y).
Adjusting for portfolio gains (S$616m) and revaluation gains/impairments (S$236m), CapitaLand Investment's FY21 operating PATMI of S$497m (+12% y-o-y) was behind our estimates due to one-off transaction costs.

CapitaLand Investment's fee related earnings (FRE) rose strongly at +34% y-o-y in FY21, from its REITs (+33% y-o-y) and private funds (+36% y-o-y). This was underpinned by 10% y-o-y growth in funds under management (FUM) to S$86.2b, and event-driven fees (acquisitions/ divestments/ promotes) of S$75m (vs. S$21m in FY20). These were 18% of total FRE, and helped lift FRE/FUM ratio to 50bps (vs. 46bps/40bps in 9M21/FY20).
CapitaLand Investment raised S$1.4b in external capital with 7 funds incepted, with further launches of higher fee-generating funds in the pipeline expected to improve FUM performance, as management eyes opportunities in China, real estate credit, data centres, and renewable energy assets.

CapitaLand Investment's NAV/share rose 10% y-o-y to S$3.12, with net gearing improving to 48% from 62% in FY20. FY21 ROE was strong at 8.7%, against -3.8% in FY20, and set to rise, backed by growing fund and lodging management fees, further securitisation of on-balance sheet assets, and scaling down its share of capital in raising new FUM.
CapitaLand Investment aims to maintain FY21's S$0.12 normal dividend (including S$0.03 special dividend), which suggests 40% payout as a baseline.
See

Chua Su Tye Maybank Research | https://www.maybank-ke.com.sg/ 2022-02-28

SGX Stock Analyst Report BUY MAINTAIN BUY 4.300 SAME 4.300