CapitaLand Investment Limited (SGX: 9CI), or CLI, has been busy this year.
The property giant is working on multiple strategic initiatives to grow the business even as its lodging arm enjoys a reprieve from the nascent economic recovery.
These efforts have borne fruit as CLI reported an encouraging set of numbers for its fiscal 2022’s third quarter (3Q2022) business update.
Despite the better numbers, CLI’s share price has not managed to touch its 52-week high of S$4.30 achieved in April this year.
The big question on investors’ minds is – can the property investment company’s share price hit a new high next year?
Let’s have a recap of the group’s progress and also take a look at its recent announcements to determine this.
Growing its funds under management
Famous investor Warren Buffett said that “If the business does well, the stock eventually follows”.
CLI has done well on this front as it continued to grow its fund management (FM) fee-related earnings (FRE).
For the first nine months of 2022 (9M2022), FM FRE grew by 16% year on year from S$292 million to S$316 million.
However, funds under management (FUM) remained stagnant at S$86 billion as of 30 September 2022.
This may be about to change, though.
In early November, CLI established two new onshore renminbi (RMB) funds that raised around S$640 million in third-party capital to invest in business park opportunities.
These are the group’s first business park private funds in China and will add around S$1.6 billion to CLI’s FUM when fully deployed.
Further to this announcement, CLI also announced that it will divest a 91.8% stake in retail parcels in Queensway Mall in Penang, Malaysia, for around S$300.3 million to CapitaLand Malaysia Trust (KLSE: 5180).
This transaction will convert the group’s balance sheet assets into FUM to help generate higher FM FRE in future periods.
A continued recovery for lodging management
Turning over to CLI’s lodging business, the group’s acquisition of Oakwood in July has added 15,000 units to its global portfolio.
As a result, the number of lodging units has jumped from 129,000 as of September 2021 to 155,000 as of 3Q2022. Of the 155,000 units, 92,000 are operational while 63,000 are in the pipeline.
The good news is that fee-related earnings from lodging management have climbed 48% year on year to S$190 million for 9M2022.
This better performance was because of the signing of 26,000 units and the opening of more than 7,300 units in the same period.
FUM for this division is also set to grow further with the acquisition of a lyf co-living property in Japan in August and the signing of a student accommodation development deal in the USA in October.
Meanwhile, the recovery continues for the division as air travel experiences a strong rebound.
Revenue per available unit (RevPAU) surged 41% year on year to S$90 with all regions except China experiencing higher RevPAU.
And with China recently announcing an easing of its strict COVID-zero protocols, CLI may see a RevPAU year-on-year jump for its China lodging sub-division next year.
Capital recycling to grow FUM
With CLI’s aim to go asset-light, the group is undertaking divestments to achieve this objective.
As of 3 November, the total divestment value has hit S$2.4 billion, of which close to 86% has been retained as FUM.
With the sale of its majority stake in the Penang mall, CLI has brought its gross divestments to S$2.7 billion year to date.
Remember that this capital recycling will eventually flow into FUM for both its listed and private funds.
Over time, the growth in FUM will help to boost its FM FRE, which flows down to CLI’s bottom line.
Other business initiatives
Elsewhere, CLI has also been busy building other pillars of its business.
In late October, the group entered a joint venture to establish an Asia-focused self-storage platform with APG Asset Management N.V. (APG).
Both APG and CLI have committed an initial S$570 million to this venture to fund the acquisition of Extra Space Asia (ESA).
ESA is one of the region’s largest self-storage businesses with 70 owned or leased facilities across six Asian cities, with the bulk (70%) of its net property income generated in Singapore.
CLI believes that with the lower penetration rates for self-storage in Asia, there exists a long growth runway for such platforms in the region.
Get Smart: Multiple catalysts
Multiple catalysts can take CLI’s business to the next level in 2023.
FUM is set to grow while lodging management should enjoy a sustained recovery.
Meanwhile, CLI is also undertaking other initiatives to grow its real estate business by exploring other asset classes such as self-storage properties.
Should CLI’s net profit continue its ascent, its share price should also eventually follow.
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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.
