- CLI aims to double its funds under management to S$200 billion by 2028, focusing on regions like India, Australia, Korea, Japan, the US, and Europe.
- The company plans to double its operating earnings to over S$1 billion by 2028-2030, driven by fee-based businesses.
- CLI intends to improve capital efficiency by reducing stakes in private and listed funds while allocating S$5 billion for mergers, acquisitions, and asset warehousing.
CapitaLand Investment Ltd (CLI) (SGX:9CI) (CAPN.SI) is positioning itself for future growth and profitability with ambitious plans to double its funds under management (FUM) by 2028 and its operating earnings by 2028 to 2030.
CLI is a global real estate investment manager with operations across Asia Pacific, Europe, and the United States. The group’s FUM spans various asset classes, including integrated developments, retail, office, lodging and new economy sectors such as business parks and data centers.
The group’s business model features fee income-related businesses and real estate investment businesses. Singapore state-owned investment firm Temasek Holdings is a major shareholder of the company, holding a 51.8% stake.
CLI’s Key Priorities
1. Scaling Up FUM
CLI targets S$200 billion in FUM by 2028, with growth concentrated in India, Australia, Korea, Japan the US and Europe. However, Southeast Asia and China are expected to stabilise or slow down from the current 39% and 27%, respectively, to 30-40% and 10-20% by 2028. Sector-wise, CLI is leveraging trends in lodging and living assets, logistics, and data centers.
As of November 5, FUM reached S$102 billion, up from S$91 billion at the end of 2021, with S$63 billion in listed funds and S$39 billion in private funds. New economy assets, comprising 32% of FUM, remain a key focus.
On November 20, CLI announced an acquisition of 40% stake in SC Capital Partners Group for S$280 million, increasing its FUM to S$113 billion and marking its entry into the Japan real estate investment trust (REIT) market.
2. Doubling Operating Earnings
CLI has a goal of increasing operating earnings to over S$1 billion by 2028-2030, with 60-70% derived from fee-based businesses. The shift toward fee income model highlights CLI’s focus on managing assets rather than owning them.
For the first nine months of 2024, its fee income-related business revenue grew 6% year-on-year (YoY) to S$845 million, contributing 40% of total revenue. Real estate investment business revenue fell 2% YoY to S$1.42 billion, making up 60% of the topline.
The growth drivers in improving operating earnings include launching new funds and new REITs in markets like China, India, and Australia, focusing on higher-return private funds, and increasing non-China return on equity (ROE) to double digits within three years, up from the 6% in 2023.
Within the real estate investment business, it aims for earnings to be driven by higher earnings from private funds and warehousing of products such as credit products.
3. Optimizing Capital Efficiency
CLI plans to lower its stakes in private funds from around 25% to 10-15% and reduce its listed funds from 17-41% to 15-20% to support its S$200 billion FUM objective. It is also allocating S$5 billion for mergers, acquisitions, and asset warehousing to support new REITs and funds. CLI will continue to reward shareholders through dividends and share buybacks.
CLI bought back 126.2 million shares at an average price of S$2.72 per share in 2024 up to November 13. This included 31.2 million shares bought back in January under the FY2023 share purchase mandate and 95 million shares bought back under the FY2024 mandate.
Is CLI Worth Buying?
Given CLI’s clear direction, ambitious targets, and focus on capital efficiency, the stock presents a promising investment opportunity. The company’s asset-light model and recurring fee-income base provide good income visibility. However, investors should consider potential risks, such as a weak real estate market and high interest rates, which could impact returns.
As of November 25, the Bloomberg analyst consensus target price for CLI remains at S$3.55, supported by 16 “buy” calls and no “hold” or “sell” recommendations. The stock ranks as the 12th most traded year-to-date in SGX, with an average daily turnover of S$27.4 million.
Disclaimer: ProsperUs Manager of Content, Hailey Chung, does not own shares of the company.
References
CGSI Note | CapitaLand Investment | Nov 25, 2024
CGSI Note | CapitaLand Investment | Nov 6, 2024
SGX Market Updates | CapitaLand Investment | Nov 18, 2024
