CapitaLand Investment Limited (SGX: 9CI), or CLI, is at an important crossroad.
The real estate investment manager plans to grow its funds and assets under management and extend its presence internationally.
The blue-chip group’s global ambitions make it an interesting play for investors who are looking at promising stocks with latent potential.
CLI’s share price, however, dipped 17.1% in 2024 to end at S$2.62 amid a backdrop of macroeconomic uncertainty and high interest rates.
Can the property giant successfully navigate these rough waters and emerge triumphant?
A mixed financial performance
CLI reported a mixed financial performance for its third quarter (3Q 2024) and nine-month 2024 (9M 2024) business update.
For its fee income-related business (FRB), revenue rose 6% year on year to S$845 million for 9M 2024 and made up 37% of total group revenue.
However, revenue from CLI’s real estate investment business (REIB) dipped by 2% year on year to S$1.4 billion.
The result is that total revenue inched up just 0.9% year on year to S$2.1 billion for 9M 2024.
Real estate assets under management (AUM) stayed flat at S$134 billion as of 30 September 2024 compared with the end of 2023.
Funds under management (FUM) grew slightly from S$99 billion to S$102 billion over the same period.
Over at CLI’s lodging division, revenue per available unit (RevPAU) increased by 4% year on year to S$93, contributed by higher occupancy and daily average rates.
While the group did register overall growth in revenue, FUM, and RevPAU, investors may be looking for greater quantum of improvement.
Ambitious plans revealed
To its credit, CLI did communicate its long-term plans during its recent Investor Day held in November 2024.
It also showcased its growth since it was spun out of CapitaLand Limited back in September 2021.
Back then, FUM stood at S$87 billion but has since grown to S$113 billion as of November 2024.
Fee-related earnings also increased, albeit at a slower pace, while the lodging division’s RevPAU gained 48% since listing.
CLI also highlighted the three megatrends of demographics, disruption, and digitalisation that will act as important catalysts to grow the business.
The group’s plan is to increase its FUM to S$200 billion by 2028 and double its fee-related business’s operating profit from S$318 million in 2023 to more than S$650 million by 2028 to 2030.
Last but not least, the real estate manager’s plans include the accelerating of its geographical diversification in Asia Pacific along with Europe and the US.
Encouraging business developments
To be sure, these plans will take time to achieve.
CLI has announced several business developments and updates in the past several months in its quest to expand internationally.
Back in November last year, CLI acquired a 40% stake in SC Capital Partners for S$280 million to deepen its presence in Japan.
76% of SC Capital’s S$11 billion FUM is in Japan and this acquisition added to CLI’s total FUM, taking it one step further to achieving its 2028 target.
The group also appointed two senior hires in Australia in the same month to spearhead the growth of real estate private equity and credit funds down under.
A month later in December, CLI announced the acquisition of Wingate in Australia to expand its private credit business.
Wingate is one of Australia’s largest private credit investment managers and its A$2.5 billion of FUM will boost CLI’s FUM to S$115 billion.
Continued tough macroeconomic conditions
The above acquisitions and business developments are encouraging, but CEO Lee Chee Koon warned of tough conditions this year that may throw a spanner in the works.
The ongoing Russia-Ukraine war and Middle East crisis have dampened investor and consumer sentiment.
In addition, a slower recovery in China coupled with high interest rates also means CLI needs to work harder at fundraising.
These headwinds will impact CLI’s ability to grow as it forges ahead with its Investor Day objectives.
Get Smart: Slow and steady wins the race
CLI has communicated its goals clearly during its Investor Day and taken steps to grow its FUM while expanding its presence geographically.
These initiatives are encouraging as they should result in higher fee income-related earnings and REIB revenue.
That said, high interest rates may dampen the group’s earnings as it takes on debt for expansion.
The blue-chip group has good potential to continue growing its business, but investors need to watch out for the risks and challenges for the remainder of 2025.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
