It’s been an interesting journey for the CapitaLand Group in the last two years.
CapitaLand Limited had privatised its development arm and listed its investment arm as CapitaLand Investment Limited (SGX: 9CI), or CLI, last year.
Then, CLI had reported a commendable performance for its maiden fiscal 2021 (FY2021) earnings report while declaring a final dividend of S$0.12 and a special dividend of S$0.03, taking the total FY2021 dividend to S$0.15.
Yesterday, the property giant released its business update for fiscal 2022’s first quarter (1Q2022).
From this report, we try to discern if the group can increase its dividends for 2022.
A commendable performance
CLI’s 1Q2022 financial performance was encouraging as it reported a 16% year on year growth in revenue to S$598 million.
The firm’s fee-income related business (FRB) saw a 17% year on year increase to S$262 million, driven by its lodging and fund management divisions.
This amount also includes a S$31 million performance fee recognised under other operating income.
As for CLI’s real estate investment business (REIB), revenue jumped by 28% year on year to S$403 million.
Growing its fee-related earnings
The group continues to work on growing its funds under management (FUM) and associated fee-related earnings (FRE) for its private and listed funds.
FUM stayed constant since the end of 2021 at S$86 billion, but FRE increased by 28% year on year to S$132 million in 1Q2022.
The main reason for the jump was due to an increase in FRE from private funds of S$59 million, up sharply from just S$7 million in the same period last year.
In January this year, the group exited a CLI-managed Vietnam Value-add Fund and realised an internal rate of return of 34% by selling an international Grade A office building in Hanoi for S$751 million.
Making progress on capital recycling
CLI has an annual target to achieve S$3 billion in divestments.
As of 11 May this year, this objective has already been more than 50% met with a total of S$1.6 billion in divestments.
The main reason was because of the divestment of 79 Robinson Road property, now renamed “CapitaSky”, to CapitaLand Integrated Commercial Trust (SGX: C38U), which accounted for more than 40% of CLI’s annual divestment target.
An estimated gain on disposal of S$72 million was realised from this transaction.
Looking ahead, CLI still has around S$10 billion of assets on its balance sheet that can be converted to FUM in the future.
An improvement for lodging management
CLI’s Lodging division is also doing well.
The total number of lodging units in the group’s portfolio has increased by 9% year on year to 135,000 units.
More than 2,200 units were opened across Africa, Asia, the Middle East, and Europe.
Revenue per available unit, or RevPAU, also surged by 34% year on year to S$71.
As a result, lodging management FRE also increased in tandem to S$55 million, up 31% year on year.
CLI is on track to meet its 2023 target of having 160,000 units.
lyf, Ascott’s co-living brand, is targeting rapid expansion after its one-north campus in Singapore welcomed its first guest in November last year.
Ascott currently owns 17 lyf properties comprising 3,200 units in 14 cities and nine countries.
CLI’s ambitious target is to open a total of 150 lyf properties by 2030 with over 30,000 units.
Fee income from its lodging segment will surge along with this expansion.
A bright business outlook
The property investment specialist is sanguine about its prospects for the rest of 2022.
Operating conditions in most of its markets, except for China, are improving.
Although geopolitical risks are present with the Russia-Ukraine war and global supply chain disruption, CLI remains confident that the group can remain resilient and continue to capitalise on attractive investment opportunities.
High chance of a dividend boost
CLI did not disclose details of its cash flow as 1Q2022 was only a business update.
However, looking at the trajectory of its business growth and the increase in both FRE and its REIB, it seems the group has been successful in growing despite the challenging environment.
The capital recycling numbers also look encouraging as CLI unlocks value from part of its portfolio of assets.
We still need to monitor how the rest of this year will pan out, but for now, there seems to be a reasonable chance for a dividend increase.
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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.