CapitaLand Investment Limited (SGX: 9CI), or CLI, has released an encouraging set of numbers for its fiscal 2022’s first half (1H2022) earnings.
The group is moving further along with its capital recycling target and is also closer to achieving its objective for its lodging management unit.
As a recap, CLI was spun out from Capitaland Limited in a demerger that saw the latter’s development unit privatised under Temasek Holdings.
The property investment giant’s latest report card shows good progress on several fronts and highlights the group’s commitment to building up its recurring income streams.
Here are five highlights from CLI’s earnings that investors should take to heart.
1. A jump in core net profit
Revenue for the group grew 29.1% year on year to S$1.35 billion, aided by increases in fee income from CLI’s fund and lodging management divisions.
The property group’s lodging division also saw better contributions while its retail properties in both Singapore and Malaysia posted a better performance on easing restrictions.
Net profit after tax fell by 38.3% year on year to S$433 million as the group registered lower portfolio gains from capital recycling compared with 1H2021.
Portfolio gains for 1H2022 stood at S$87 million, significantly below 1H2021’s S$438 million.
Stripping out this figure, core operating profit saw a 31.1% year on year improvement from S$264 million to S$346 million.
2. Fee income-related business doing better
CLI has two core arms – its fee income-related business (FRB) and real estate investment business (REIB).
Income for the FRB division comes from CLI’s funds under management (FUM) and also its lodging management arm.
FUM stayed constant year on year at S$86 billion, of which close to 70% belonged to listed funds.
Fund management fee-related earnings (FRE) saw a 21% year on year rise to S$238 million for 1H2022.
The increase was mainly due to an 81% year on year surge in FRE from private funds, which made up 35% of total FRE for 1H2022.
For comparison, this category made up less than a quarter of FRE for 1H2021.
As a whole, total revenue for its FRB segment, which includes its lodging unit, rose 16% year on year to S$507 million.
We will discuss the REIB business under Point 4 below.
3. Adding more lodging units
Moving on to CLI’s lodging management sub-division, 1H2022 saw total lodging units rise to 139,000, comprising 82,000 operational units and 57,000 in the pipeline.
In addition, CLI has also completed its acquisition of Oakwood Worldwide in July.
If this acquisition is included, the number of units rises to 153,000, just shy of CLI’s 2023 target of 160,000 units.
In addition, more than 4,500 lodging units were opened in 1H2022, helping to bump up the FRE for this sub-division 37% year on year to S$118 million.
There was also good news for revenue per available unit, or RevPAU.
Overall RevPAU jumped 44% year on year to S$82 for 1H2022, with all regions except China registering a year on year RevPAU increase.
The outlook for travel remains positive as forward bookings indicate sustained travel demand.
This trend will help to buoy the division, while higher room rates will be charged to offset increases in utility and labour costs because of inflation.
4. Stable real estate investment business
For the REIB division, CLI’s total assets under management (AUM) saw a slight 3% year on year dip to S$36.6 billion.
The bulk of this AUM comprised China (32%) and Singapore (30%) with lodging and retail assets making up 60% of the total AUM.
CLI’s Singapore properties are enjoying occupancy levels above 90% across the retail, office and new economy assets for the second quarter of 2022 (2Q2022).
China, however, saw the occupancy rate for its office property division dip from 89% in 1Q2022 to 86% in 2Q2022.
For India, CLI’s new economy assets saw a mild negative rental reversion while the occupancy rate stood at 87% for the latest quarter.
5. A cautious outlook
CLI warned of macroeconomic uncertainties as we head into 2H2022, principally contributed by a mix of high inflation, rising interest rates and geopolitical tensions.
The group will focus on its new private equity real estate partner relationships and has a robust lineup of private fund products under review in areas such as China special situations and longer-stay lodging.
On the capital recycling front, CLI is on track to meet its S$3 billion target and has ample dry powder to deploy funds when it sees the right opportunities.
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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.
