CapitaLand Investment - Phillip Securities 2022-08-15: Fee-Related Business Support Revenue


CapitaLand Investment - Fee-Related Business Support Revenue

  • CapitaLand Investment (SGX:9CI)'s 1H22 revenue of S$1,354mil (+29% y-o-y) was in line, forming 50% of our forecast.
  • Real Estate investment revenue grew 44% y-o-y, driven by a broad-based recovery. Fee-related revenue was up 9% y-o-y, lifted by private fund management and lodging management.
  • Maintain ACCUMULATE recommendation on CapitaLand Investment with an unchanged SOTP-based target price of S$4.12. Our FY22e estimates remain unchanged. The pick-up in travel and lifting of lockdowns in China are immediate catalysts for CapitaLand Investment.

The Positives

Fund management fee-related revenue (+21% y-o-y) formed 16% of revenue.

  • Private funds management fees (+81%) were boosted by higher transaction-related fees, which formed 51% of private fund fees, while recurring fund management fees remained stable and grew 2% y-o-y. 1H22 P/E fees include performance fees of S$31mil from notable transactions such as the unwinding of CapitaLand Investment-managed CapitaLand Vietnam Commercial Value-Added Fund (CVCVF) on Jan 22 and the reduction in an equity stake in Athena LP on Feb 22.
  • CapitaLand Investment’s listed funds posted +7% and -15% growth in recurring and transaction-related fees respectively. The latter was the result of a high base in 1H21, as transactions picked up after the pandemic year.

Lodging segment recovering steadily.

  • Lodging management fees rose 37% on recovering operating performance as well as 8.2k/4.5k new units turning operational in FY21/1H22. RevPAU grew 44% as average daily rates grew 21% and portfolio occupancy increased 9%. Recovery was seen across all CapitaLand Investment’s key markets, except China, with the strongest RevPAU recovery in Europe (+228%) and Singapore (+54%).
  • CapitaLand Investment also signed 4.5k keys in 1H22, ~54.9% of the number of keys signed in FY21, bringing the number of keys signed to 139k.

Real estate investment business (REIB) grew 44% y-o-y,

  • on the back of reopening in most of CapitaLand Investment's markets, except for China and Japan. Significant easing of community safe management measures since Mar 22 has improved business and consumer sentiment and increased activities.
  • Leasing activity in India has similarly picked up with physical occupancy at business parks improving to ~35% from < 5% in FY21.
  • Due to China's zero COVID-19 policy, Shanghai was placed under lockdown since Mar 22 due to the spike in COVID cases. This has stalled leasing activity and has resulted in rental rebates (~1.2 months) given to affected tenants in 2Q22. For context, 15 of CapitaLand Investment's assets are in China, representing 34% of its China exposure.

The Negative

Macro-economic and geopolitical headwinds slowing fund generation and acquisition momentum.

  • Inflation, rising interest rates and the Russia-Ukraine conflict have resulted in more circumspect behaviour and higher required returns for capital investors, limiting the assets eligible to seed funds. While US$-denominated capital has taken a wait-and-see approach towards RMB investments, CapitaLand Investment’s RMB fund management license allows it to tap local capital.
  • However, lockdowns and tightened restrictions in Shanghai and Beijing have impeded business discussions and may delay planned transactions if lockdowns persist.


  • CapitaLand Investment’s real estate investment and lodging management business should continue to recover on the back of further easing of travel and mobility restrictions. Having divested S$1.6bn year-to-date, CapitaLand Investment is on track to hit its annual divestment target of S$3bn. However, its 10% FUM growth target may be at risk given the current macro-economic and geopolitical headwinds which have resulted in more circumspect behaviour among capital investors.
  • Prolonged lockdowns in Shanghai and Beijing may also delay planned transactions.

Maintain ACCUMULATE with unchanged SOTP-based target price of S$4.12

Glenn Thum Phillip Securities Research | https://www.stocksbnb.com/ 2022-08-15