If you are keen on investing in property-related companies, you are in luck.
Earlier last week, City Developments Limited (SGX: C09) released its fiscal 2023’s first half (1H 2023) earnings and reported a 48% year-on-year jump in core profit before tax.
Late last week, CapitaLand Investment Limited (SGX: 9CI), or CLI, followed-up with its latest 1H 2023 earnings.
The blue-chip property giant did not disappoint as it reported healthy growth for its assets under management (AUM) and funds under management (FUM).
Join us as we sift out five interesting highlights from CLI’s financial report card.
1. A steady set of financial numbers
CLI reported a slight 1% year on year fall in revenue to S$1.3 billion.
There were lower contributions from the group’s Real Estate Investment Business (REIB) due to property divestments but the drop was offset by a higher contribution from its Fee Income-related Business (FRB).
FRB revenue grew 9% year on year to S$519 million as the group enjoyed better recurring fund management fees along with higher fee-related earnings (FRE) from its lodging business.
Higher finance costs and lower contributions from associates and joint ventures led to a 19% year-on-year decline in CLI’s net profit to S$351 million.
Stripping out portfolio gains and losses as well as one-off items, CLI’s core operating net profit slid just slightly year on year from S$346 million to S$344 million.
The property behemoth also generated a positive free cash flow of S$232 million for 1H 2023, although this was nearly 20% lower than the prior year’s S$289 million.
2. Slight growth in AUM and FUM
As of 30 June 2023, CLI’s real estate AUM and FUM stood at S$134 billion and S$89 billion, respectively.
This level was slightly higher than the AUM of S$132 billion and FUM of S$88 billion just six months ago.
Of the S$89 billion of FUM, S$29 billion comprised private funds while the remaining S$60 billion was from CLI’s listed funds.
There is another S$9.8 billion of FUM to be added to the division from committed by undeployed capital, acquisitions, and forward purchases, bringing embedded FUM year-to-date to S$99 billion.
CLI’s listed funds made total investments of S$962 million as of 10 August while conducting S$99 million of divestments.
The good news is that net property income had improved across all its listed funds in constant currency terms.
As for CLI’s private funds, the total committed capital raised stood at S$3.2 billion as of 10 August and includes new fund CapitaLand India Growth Fund 2 as well as its China-based CapitaLand China Opportunistic Partners Programme and Japan-based CapitaLand Open End Real Estate Fund.
3. Better fee-related earnings
Moving on to FRE, total FRE inched up 2% year on year to S$519 million for 1H 2023.
For FM FRE, there was a fall from S$238 million to S$208 million due to a tougher comparison arising from a higher event-driven FRE in 1H 2022.
Focusing on just the recurring FRE, CLI saw a 10% year-on-year increase from S$167 million to S$183 million.
For lodging management, the global travel recovery saw FRE for the division jump 35% year on year to S$159 million.
CLI’s property management division saw stable FRE with a marginal 1% year on year increase to S$152 million.
4. A strong recovery in lodging management
Lodging management enjoyed a sharp 32% year on year jump in revenue per available unit (RevPAU) to S$87 for 1H 2023.
The better RevPAU was driven by an 11-percentage point increase in occupancy and average daily rates, both of which are 6% higher than the pre-COVID level in 1H 2019.
A total of around 7,000 units were signed across 40 properties as of 1 August 2023 with more than 40 properties slated to open between August to December this year.
CLI’s target is to grow lodging management’s FRE to more than S$500 million in five years, with the current annualised FRE at S$318 million.
5. A tough capital recycling environment
CLI has reported a tough operating environment for capital recycling with a total divestment value of S$839 million.
The bulk of divestments are to fund the group’s fund management vehicles and CLI still has more than S$10 billion of pipeline assets available for recycling.
Total investment value has hit S$2.4 billion with strategic investments made across many Asian markets.
Get Smart: Slow and steady wins the race
CLI is slowly building up its asset base over time while growing its recurring FRE.
Management’s slow and steady approach should ensure that the group can see both its AUM and FUM rise over time.
Investors will need patience, though, as this process will take time to execute.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
