It has not been an easy operating environment for CapitaLand Investment Limited (SGX: 9CI), or CLI.
Geopolitical tensions, high inflation and surging interest rates are acting as headwinds for the group.
Despite these challenges, CLI reported an encouraging set of numbers for its fiscal 2022’s third quarter (3Q2022) business update.
The property giant made advancements in three key areas of fund management, lodging management, and capital recycling.
Here are five aspects that investors should know about CLI’s latest update.
1. Growing its fee-related earnings
The first division to look at is CLI’s fee income-related businesses represented by its fund management division.
Total funds under management (FUM) stayed constant for the first nine months of 2022 (9M2022) at S$86 billion compared with the end of last year.
The good news, however, is that CLI’s fund management (FM) fee-related earnings (FRE) have risen by 6.3% year on year in 3Q2022 to S$101 million.
Every quarter this year has seen a year on year jump in earnings, with 9M2022’s FM FRE coming in at S$339 million, 16.1% higher than the prior year’s S$292 million.
CLI’s stable of listed funds helped to drive growth in FRE for the group as it focused on higher-yielding investments.
9M2022 investments in listed funds totalled S$1.9 billion, with FRE from this segment rising 5% year on year to S$221 million.
Aside from investments, 17 properties within CLI’s listed funds have also undergone redevelopment or asset enhancement initiatives (AEIs).
Some examples include the redevelopment of Liang Court Singapore by CapitaLand Ascott REIT (SGX: HMN) and the conversion of a San Diego office to a life sciences property by CapitaLand Ascendas REIT (SGX: A17U).
2. Raising more funds through private sources
Meanwhile, CLI is also raising more funds through private channels, underscoring the property giant’s ability to navigate tough conditions.
Five new funds were launched in 9M2022 that attracted top-tier institutional investors, a testament to CLI’s reputation and clout.
9M2022 saw S$752 million of external capital raised with FUM coming in at S$27 billion as of 30 September 2022.
FRE for 9M2022 surged by 44% year on year to S$118 million from private funds.
Just this month, CLI announced the launch of its second and third onshore RMB fund in China totalling RMB 4 billion.
These two funds will invest in business park opportunities in China and have welcomed 10 new capital partners on board.
3. A strong recovery in lodging
Elsewhere, CLI’s lodging management (LM) business also enjoyed a strong recovery as air travel surged with the reopening of borders.
LM FRE for 9M2022 climbed by 48% year on year to S$190 million as CLI opened more than 7,300 units during the period.
The number of lodging units within its portfolio has risen to 155,000, up 20% year on year, and is just 5,000 short of its 2023 target of 160,000.
Revenue per available unit (RevPAU) jumped 41% year on year to S$90, with surges seen in regions such as Singapore, Europe, Southeast Asia and Australia.
These improvements were driven by higher average daily rates (up 20% year on year) and better occupancy levels (+10% year on year).
The travel outlook remains positive with forward bookings indicating sustained demand for the LM division despite rising utility and labour costs.
4. Value created from asset recycling
Over at CLI’s real estate investment business (REIB), the group continued to execute selective divestments to recycle capital.
As of 3 November, the total divestment value came up to S$2.4 billion, of which 86% was to private and listed funds under CLI’s umbrella.
These divestments were made at an average of 14% premium to their book values.
On the flip side, CLI also invested a total of S$4.2 billion, of which around 84% was funnelled into FUM to generate recurring FRE for the group.
Total assets for CLI stood at S$36.4 billion as of 30 September 2022, with the bulk of these assets located in both Singapore (31%) and China (32%).
5. A stable credit profile
CLI maintained a healthy gearing level, with net debt at around half of its equity base.
The interest coverage ratio stood healthy at 4.2 times and the group still had S$7.2 billion worth of cash and undrawn facilities to tap on.
The group’s implied average cost of debt stood at 2.9% with 62% of its loans pegged to fixed rates.
CLI is increasingly pivoting towards sustainable financing and is committed to financial prudence to weather the upcoming economic storm.
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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.
