CapitaLand Investment Reports Higher Fee-Related Earnings as it Recycles Capital: 5 Highlights from the Property Giant’s Latest Business Update


CapitaLand Investment Limited (SGX: 9CI), or CLI, is the next in line to report its third quarter 2023 (3Q 2023) business update.

The blue-chip property giant provided details on its various businesses and disclosed its progress in growing its assets and funds under management along with its recurring fee income.

CLI also highlighted ongoing challenges and potential risks as 2024 beckons.

Here are five highlights from the group’s latest business update that investors should know about.

1. A slight dip in total revenue

For the first nine months of 2023 (9M 2023), CLI reported a slight 3% year-on-year dip in total revenue to S$2.1 billion.

Of this total, the Real Estate Investment Business (REIB) division made up 64% while the Fee Income-Related Business (FRB) took up the remainder.

REIB saw revenue for 9M 2023 fall by 8% year on year to S$1.44 billion but this was offset by a 9% year on year increase in FRB revenue to S$799 million.

For FRB, the main increases came from the lodging management and commercial management sub-divisions.

This increase was offset by a nearly 30% year-on-year fall in fee income from the private funds management sub-division.

2. FUM and recurring fee-related earnings continue to grow

CLI is making encouraging progress in growing its funds under management (FUM).

FUM grew by 13.6% from S$88 billion at the end of 2022 to S$100 billion as of 30 September 2023.

Fund management fee-related earnings (FM FRE), however, dipped from S$339 million in 9M 2022 to S$304 million in 9M 2023.

The prior year’s FM FRE comprised S$89 million of event-driven, one-off earnings compared with S$32 million in 9M 2023.

Adjusting for these items, CLI’s recurring fees increased by 9% year on year to S$272 million for 9M 2023.

3. Ongoing capital recycling efforts

CLI reported steady capital recycling though it was slower this year compared to prior years.

The group saw a total of S$1.2 billion of divestments made up till 8 November 2023.

Of this amount, the bulk (45%) of the assets were sold to listed funds with another 32% divested to external funds.

The latest divestments include an office tower in Malaysia to CapitaLand Malaysia Trust (KLSE: 5180) for S$14.7 million and the sale of two hotels in Sydney, Australia, to CapitaLand Ascott Trust (SGX: HMN) for S$95.6 million.

4. Encouraging progress in private capital raising

The group is seeing healthy progression in private capital raising, with a total of S$3.5 billion raised in 9M 2023.

This amount is already higher than the S$2.5 billion for the whole of 2022 and is also more than double the S$1.5 billion raised in 2021.

CLI’s total private equity FUM (PE FUM) stood at S$29 billion, with a total of five funds launched year-to-date.

Some of the investments made during 3Q 2023 include a S$112 million Grade A logistics asset in South Korea and a S$166 million international tech park in Chennai, India.

Meanwhile, CLI has also launched its inaugural wellness and healthcare-related fund that is positioned to tap into the wellness and healthcare sector in Southeast Asia.

The fund was seeded with S$350 million by both CLI and Pruksa Holding (BKK: PSH) with a target size of S$500 million.

There will be an option to upsize the fund to S$1 billion with a target to acquire assets in Singapore, Malaysia, and Thailand in the healthcare, wellness, living, and lodging sectors.

5. Lodging platform demonstrating healthy growth

Over at its lodging management division, CLI is seeing healthy growth in lodging management fee-related earnings (LM FRE) and lodging units.

The number of lodging units rose by 5% year on year to 163,000 units with around 9,500 units signed across 55 properties and close to 6,200 units opened across 33 properties in 9M 2023.

LM FRE climbed 31% year on year to S$249 million with a target to hit S$500 million by 2028.

The air travel and tourism recovery continued as the division reported a 25% year-on-year jump in revenue per available unit (RevPAU) to S$89 for 9M 2023.

Singapore saw a healthy 36% year-on-year increase in RevPAU to S$198 while North Asia’s (ex-China) RevPAU more than doubled year on year to S$143.

Both Singapore and Europe are seeing RevPAU at 30% and 17% above pre-COVID levels, respectively.

The return of travellers from China also pushed up occupancy by 12 percentage points.

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Disclosure: Royston Yang does not own shares in any of the companies mentioned.

The post CapitaLand Investment Reports Higher Fee-Related Earnings as it Recycles Capital: 5 Highlights from the Property Giant’s Latest Business Update appeared first on The Smart Investor.