Results season is in full swing and most of the REITs have reported their latest earnings and business updates.
The local banks have also reported all their results, with the latest by OCBC Ltd (SGX: O39) showing a record net profit of S$1.88 billion.
Next up is CapitaLand Investment Limited (SGX: 9CI), or CLI, and the property giant did not disappoint.
The group is firing on multiple cylinders as it continues to see momentum in building up both its asset base and recurring income streams.
Here are five highlights from CLI’s latest business update.
1. Growth in recurring fee-related earnings
Starting with fee-related earnings (FRE), CLI reported a 23% year on year decline in FRE from S$132 million in 1Q 2022 to S$102 million in 1Q 2023.
The drop was mainly due to the absence of FRE from event-driven performance fees associated with the exit of two private funds in the same period last year.
Private fund FRE made up around 30.4% of total fund management (FM) FRE for the quarter with listed funds making up the remainder.
The good news is that listed fund recurring FRE inched up from S$61 million to S$64 million.
The total recurring FRE for both private and listed funds comprised the bulk (85%) of total FRE, and this is the metric to watch for in future periods as CLI continues to execute its asset-light strategy.
2. Bolstering its private fund division
While CLI’s listed funds are usually in the spotlight, many investors may not realise that the group is also actively growing its private fund division.
The total capital raised thus far for this division amounts to S$1.7 billion, with total investments of S$1.2 billion.
Some of the new private funds in CLI’s portfolio include CapitaLand China Opportunistic Partners Programme, a single-asset fund that invests in special situations within China.
This fund has a total committed equity of S$1.1 billion.
If you zoom out, CLI’s overall private funds division’s FUM stands at S$29 billion for 1Q 2023.
CLI also diversified its exposure into the multifamily space last month with the setting up of the CapitaLand Open End Real Estate Fund.
This fund made a forward purchase of six assets in Osaka, Japan, for S$141 million and the total committed capital has grown to around S$589 million since its inception in 2021.
3. Recovery benefitting lodging division
Air travel and tourism are experiencing a sharp surge as pent-up demand results in more people travelling around the world.
CLI’s lodging segment is a beneficiary of this tailwind, with the division’s revenue per available unit (RevPAU) jumping 42% year on year to S$81.
The occupancy rate also improved by 13 percentage points while the average daily rate saw a 14% year on year increase.
China’s recent re-opening has been a boon for the lodging division as customer enquiries rose sharply and daily reservation volumes grew nearly 150% in March 2023 compared to three months ago.
The division ended 1Q 2023 with 161,000 lodging units in its portfolio, up 19.3% year on year.
There’s more to come as CLI is slated to open more than 13,500 units across 70 properties this year alone.
4. Stable real estate investment business
Over at CLI’s real estate investment business (REIB), the net asset value of its portfolio has risen slightly to S$15.3 billion in 1Q 2023 from S$15.1 billion in the prior year.
Total assets remained stable at S$35.1 billion, with both China and Singapore making up 61% of the asset base.
In terms of property sub-segment, lodging made up the majority of assets at 36% while retail came in second at 26%.
5. Ambitious growth targets
Looking ahead, CLI’s management has set several ambitious targets for the business.
The group has always focused on recycling capital to optimise its portfolio and extract more value for shareholders.
CLI is targeting at least S$3 billion of divestments this year, and divestments have started slow at just S$35 million for 1Q 2023.
For FUM, CLI believes it is on track to meet its target of S$100 billion by next year. Total FUM currently stands at S$89 billion as of 1Q 2023, edging up slightly from S$88 billion a year ago.
For the lodging division, a new five-year target has been set to grow the division’s FRE to more than S$500 million from the current S$258 million (in 2022).
To do so, the division must achieve an 8% to 10% annual net room growth rate.
Ascott, CLI’s lodging brand, intends to grow organically and continue to seek out acquisition opportunities to raise its profile as a global player in the sector.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.