• 1Q25 revenue of S$496mn (-24% YoY) was slightly below our estimates, forming 22% of our FY25e forecast. The YoY decline was due to the deconsolidation of CLAS. Excluding this, revenue was stable YoY. Due to the challenging transactions market, the 1Q25 fee income-related business (FRB) revenue grew by only 3%. Excluding the deconsolidation of CLAS, the real estate investment business (REIB) revenue fell 6% due to the absence of contributions from divested properties.
• CLI has raised S$1.1bn YTD, including a RMB5bn mandate with a Chinese domestic institution to invest in core strategies in China. It has also applied to list CapitaLand Commercial C-REIT (CLCR), providing CLI with an additional platform for capital recycling and FUM growth. Investments totalling S$1.5bn were made in 1Q25, including the S$944mn Osaka DC development, bringing deployed FUM to c.S$109bn.
• Maintain BUY with an unchanged SOTP TP of S$3.65. Our estimates remain unchanged. We continue to favour CLI for its robust and growing recurring fee income stream and asset-light strategy, which enhances resilience amid macroeconomic uncertainty. With a low debt/equity ratio of 0.39x, CLI can capitalise on future acquisitions and expansion.

• FY24 PATMI of S$479mn (+165% YoY) was below our expectations, forming 64% of our FY24e forecast. The YoY gain was mainly due to lower revaluation losses of S$261mn (-57% YoY). Excluding revaluation losses, FY24 PATMI was in line with our estimates. FY24 revenue rose 1% to S$2.8bn, led by a 9.3% YoY increase in Fee Income-related Business (FRB) revenue, which offset the 3.4% decline in Real Estate Investment Business (REIB) revenue. Operating PATMI fell 10.2% YoY to S$510mn from the absence of contribution from divested properties and one-off income.
• CLI declared a final DPS of 12 cents and a special dividend-in-specie of 0.031 CICT units per share, valued at 6 cents per CLI share, taking total DPS to 18 cents. In addition, CLI also revised its dividend payout policy to a minimum 50% of cash PATMI, up from 30% previously to enhance shareholder returns.
• Maintain BUY with a higher SOTP TP of S$3.65 (previously S$3.38). We lower our FY25e PATMI by 6% to reflect recent corporate activities, including the divestment of ION Orchard and the dividend-in-specie of CICT units. We like CLI for its robust recurring fee income stream and asset-light model. Growth drivers include increased REIT transactions, a faster pace of balance sheet reduction which should improve ROE, and the launch of new funds. CLI remains on track to achieve its S$200bn (FY24: S$117bn, FY23: S$99bn) FUM target by 2028 through organic and inorganic growth. With a low debt/equity ratio of 0.39x, CLI is well positioned for future acquisitions and expansion.

• CLI aims to double its funds under management (FUM) to S$200bn by 2028 and double its operating earnings to over S$1bn by 2028-2030. By focusing on growth-oriented capital deployment, it targets 60-70% of these earnings to come from its four Fee Income-related Businesses (FRB).
• FRB growth will be fuelled by expanding the REIT platform, accelerating private funds growth, and scaling lodging and commercial management through organic expansion, new listings, fund launches, and M&A activities.
• Maintain BUY with an unchanged SOTP TP of S$3.38. Our estimates remain unchanged. CLI remains focused on driving total shareholder return through growth, earnings quality and return on equity.

• 9M24 revenue of S$2.1bn (+1% YoY) was slightly below our estimates, forming 70% of our FY24e forecast. Fee Income-related Business (FRB) revenue grew 6% YoY from stronger private funds management (+14% YoY) and commercial management (+14% YoY). In contrast, Real Estate Investment Business (REIB) revenue fell 2% from divestments in India, Australia and France.
• With S$4.6bn of divestments YTD, CLI has exceeded its annual S$3bn divestment target. Total Funds Under Management (FUM) rose by c.S$2bn to S$102bn following the divestment of ION Orchard to CICT and capital raised from new partner Mitsui O.S.K. Lines. YTD deployment of private funds rose 43% YoY to S$2.1bn, with three new fund launches in 3Q24.
• Maintain BUY with an unchanged SOTP TP of S$3.38. Our estimates remain unchanged. Our SOTP-derived TP of S$3.38 represents an upside of 20% and a forward P/E of 23x. We like CLI for its robust recurring fee income stream and asset-light model. Growth drivers include more REIT transactions, further interest rate declines, and the launch of new funds.

• CLI will be divesting its 50% stake in ION Orchard to its sponsored REIT, CapitaLand Integrated Commercial Trust (CICT SP, non-rated), for a sales consideration of c.S$1.08bn. ION Orchard is currently held in a JV with Sun Hung Kai Properties (SHKP), which holds the remaining 50% stake.
• With this transaction, CLI will increase its funds under management (FUM) by S$1.85bn and will have recycled S$3.6bn in assets year-to-date, surpassing its annual capital recycling target of S$3bn. The divestment proceeds will be used to diversify the portfolio across various geographies and asset classes while also establishing new fund products to enhance fee-related income.
• Maintain BUY with an unchanged SOTP TP of S$3.38. No change in our estimates. This transaction is a positive step in advancing CLI’s asset-light strategy, recycling quality assets from its balance sheet, and growing FUM. We estimate that the absence of contribution from ION Orchard will decrease pro-forma FY24e EBITDA by c.S$106mn, or c.5%, assuming this transaction happened in Jan 2024.

Details of the transaction
The sales consideration of c.S$1.08bn was based on the adjusted net asset values of the companies holding ION Orchard, taking into account 50% of the agreed property valuation of c.S$3.7bn (100% basis). This proposed transaction is subject to the approval of CICT’s noninterested unitholders and is targeted to be completed in 4Q24. The sales consideration of c.S$1.08bn will be paid in cash. CLI has undertaken to fully subscribe to its pro-rata entitlement or the preferential offering as part of the funding for CICT to acquire ION Orchard. As of June 24, CLI’s stake in CICT was 24%.

• 1H24 revenue of S$1.365bn (+1.5% YoY) and PATMI of S$331mn (-5.7% YoY) were slightly below our estimates, achieving 44% and 41% of our FY24e forecast, respectively. The YoY improvement in revenue was driven by an 8% increase in its Fee-income Related Businesses (FRB), partially offset by a 2.3% decline in the Real Estate Investment Business (REIB),which was mainly due to the absence of contributions from divested assets.
• CLI’s FRB contributed 63% of 1H24 operating PATMI, up from 49% in 1H23. This trend is expected to continue as the group shifts towards an asset-light, recurring fee income model. The group aims to double Funds Under Management (FUM) to S$200bn (1H24: S$100bn) by FY28. In 1H24, c.S$1bn of FUM was deployed, increasing the total deployed FUM to S$91bn from S$90bn in FY23, leaving S$9bn of committed equity yet to be deployed.
• Maintain BUY with an unchanged SOTP TP of S$3.38. We cut our FY24e PATMI by 7% after factoring in weaker contributions from the REIB. Our SOTP-derived TP of S$3.38 represents an upside of 36% and a forward P/E of 17.5x. We like CLI for its robust recurring fee income stream and asset-light model. We expect the FRB to continue improving, supported by the gradual increase in FUM, higher lodging management fees as more units open, and the return of event-driven fees.

The Positives
+ 1H24 FRB revenue continues to improve, rising 8% YoY. This was due to improvements in commercial management fees (+22%), lodging management fees (+4%), and private funds management fees (+12%). Funds Under Management, or FUM, now stands at S$100bn,
including S$9bn of committed equity yet to be deployed. CLI remains committed to doubling its FUM to S$200bn by FY28 and strives for double-digit FRB growth annually.
+ On track to hit S$3bn divestment target. Year-to-date, CLI has achieved S$1.7bn in gross divestments, including S$710m divested to funds, S$831m in multifamily assets in the USA, and S$148m reconstitution by funds. Notably, CLI recapitalised Ascendas iHub Suzhou by
divesting it as a seed asset into its new China Business Park RMB Fund III (CBPF III) at S$249mn or RMB1.4bn, securing an onshore major institutional investor as the fund’s anchor investor. Since its listing, CLI has reduced its balance sheet exposure in China by divesting S$1.5bn in assets, with over 70% transferred to CLI’s RMB funds.

The Negative
- Net debt-to-equity rose to 0.59x (1Q24: 0.53x) and the cost of debt rose 10bps QoQ to 4.1%. 61% of debt is on a fixed rate, and the interest coverage ratio remained healthy at 3.5 times. We expect the cost of debt to remain at this level for FY24e.

• Limited financial details were provided in this business update. 1Q24 revenue was flat YoY at S$650mn. Fee-related revenue (FRB) grew 7% YoY to S$274mn, while Real Estate Investment Business revenue (REIB) fell 4% to S$430mn.
• In 1Q24, CLI made S$600mn worth of divestments, up from S$35mn in 1Q23. More than 75% were divested into CLI’s fund vehicles. It is on track to hit its S$3bn annual divestment target, with the bulk of assets in the divestment pipeline coming from China and the USA.
• Maintain BUY with an unchanged SOTP TP of S$3.38. Our SOTP-derived TP of S$3.38 represents an upside of 32.6% and a forward P/E of 16.7x. We like CLI for its robust recurring fee income stream and asset-light model. We expect the FRB to continue to improve, supported by the lodging business as more units are opened and the return of event-driven fees.

The Positives

+ 1Q24 FRB revenue continues its growth trajectory, rising 7% YoY. This was due to improvements in commercial management fees (+18%), lodging management fees (+8%), and recurring fund management fees (+5%). Event-driven fees under the fund management platform remain a drag (-33% YoY), but we expect these to pick up this year as global transaction volumes gradually recover. Additionally, private funds recorded S$1bn in total investments in 1Q24, taking deployed funds under management to S$91bn from S$90bn in FY23. There is still S$9bn of dry powder pending deployment. CLI remains committed to double FUM to S$200bn in five years.

+ Faster pace of capital recycling. In 1Q24, CLI made S$600mn worth of divestments, up from S$35mn in 1Q23. More than 75% were divested into CLI’s fund vehicles. Divestment proceeds will be used to lower gearing and to pare down higher-cost debt. CLI is on track to hit its S$3bn annual divestment target, with the majority coming from China and the USA.

The Negative

- REIB revenue remains weak, falling 4% YoY. This was due to asset divestments, weaker operating performance in China, and lower revenue from the lodging platform Synergy in the USA.

• FY23 revenue of S$2.784bn (-3.2% YoY) formed 92% of our FY23e forecast while PATMI of S$181mn (-79% YoY) was below our estimate due to revaluation losses of S$600mn and lower contribution from China.
• FY23 fee-related revenue (FRB) rose 8.7% YoY, driven by higher recurring fund management fees (+9% YoY), lodging management fees (+28% YoY), and commercial management fees (+11% YoY). However, this was offset by a significant decrease of 52% in event-driven fees. Including S$10bn of funds pending deployment, CLI has reached its FY24 FUM target of S$100bn and has now set a new target to reach S$200bn in five years.
• Maintain BUY with a lower SOTP TP of S$3.38 from S$3.68. We cut our FY24e PATMI by 15% after factoring in a weaker contribution from China. Our SOTP-derived TP of S$3.38 represents an upside of 29.2% and a forward P/E of 15x. We like CLI for its robust recurring fee income stream and asset-light model. We expect the FRB to continue to improve, boosted by the lodging business with higher RevPAU (FY23: +20%) and more lodging units turning operational.

The Positives

+ FY23 FRB revenue grew 8.7% YoY, boosted by lodging management fees (+28.3%), recurring fund management fees (+9.3%), and commercial management fees (+10.8%). This is partially offset by lower event-driven fees (-52% YoY) in a market that is less conducive to deal-making. Including S$10bn in committed equity pending deployment, CLI currently has S$100bn in FUM and is targeting to reach S$200bn in five years.

The Negative

- FY23 REIB revenue fell 8.5% YoY due to lower corporate leasing income in the USA and lower rental revenue from properties in China. Rental reversions in China remain negative across all operating segments.

- Significant fair value losses of S$600mn, which came mainly from China (-S$511mn) due to weaker rents and market outlook, as well as USA (-S$231mn) due to cap rate expansion. This is partially offset by gains in Singapore (+165mn) and India (+S$44mn).

• 9M23 revenue of S$2.085bn (-3% YoY) was slightly below our estimates, forming 69% of our FY23e forecast.
• Fee-related revenue is on the rise, driven by a 31% increase in lodging management fees and a 9% growth in recurring fund management fees. However, this is offset by a significant decrease of 64% in event-driven fees. Including embedded funds under management (FUM) of S$10bn that is pending deployment, CLI has reached its 2024 FUM target of S$100bn. Total recurring income for 9M23 grew by 9% YoY.
• Maintain BUY with an unchanged SOTP TP of S$3.68. No change in our estimates. Our SOTP-derived TP of S$3.68 represents an upside of 25.3% and a forward P/E of 18x. We like CLI for its robust recurring fee income stream and asset-light model. We expect the lodging business to continue to improve with higher RevPAU (9M23: +25%) and more lodging units turning operational (>20 properties to be opened in 4Q23).

The Positives

+ Lodging segment star performer. 3Q23 RevPAU up 15% YoY, attributed to higher occupancy (+7ppts) and ADRs (+3%). Overall RevPAU stood at 107% of pre-COVID 3Q19 levels. The improvement in operating performance coupled with 6,200 units (3.8% of signed units) turning operational resulted in a 31% YoY growth in lodging management fees. CLI has a target to reach S$500mn in lodging management fees within five years.

+ Recurring fund management fees grew 9% YoY to S$272mn in 9M23.  This alleviates the impact of lower event-driven fees (-64% YoY) in a market that is less conducive for deal-making. CLI has c.S$10bn in embedded FUM that could lift fee income if deployed; it has a current FUM of S$90bn (FY22: S$88bn).

+ Active capital raising.  CLI raised S$3.5bn of capital for its private funds YTD (42% above total raised for FY22). During the quarter, it launched a new Wellness and Healthcare-related Fund with an initial close of S$350mn - it has a target fund size of S$500mn with an option to upsize to S$1bn. In 3Q23 to date alone, it has raised S$1.7bn and is looking at strong growth opportunities in SE Asia and India to deploy capital.

The Negative

- China remains a drag. Despite improvements in shopper traffic (+34% YoY) and tenant sales (+22% YoY), retail rental reversions continue to be negative. Office rental reversions were mildly negative, with only new economy assets having mildly positive rental reversions.

- Expect portfolio valuation declines at year end. Due to higher interest rates and cap rate expansion, valuation declines are expected in Australia, Europe, UK and USA. Valuations in China are also expected to decline due to the softer economic outlook in China, while valuations in Singapore and India are expected to be stable.

Outlook

CLI’s lodging management business should continue to remain strong on the back of higher travel demand. We expect event-driven fee-related income to improve in FY24 as interest rate stabilises. Deployment of capital under embedded FUM remains slow, but we expect it to pick up in 2H24. As only 64% of debt is on fixed rate, CLI could continue to be impacted by higher interest rates (+0.1ppts QoQ to 3.9% in 9M23). CLI has a current gearing of 0.55x, up from 0.52x as at end Dec22.

CLI has divested S$1.2bn of assets YTD, and it is unlikely to hit its S$3bn divestment target for FY23. It has c.S$10bn of assets in the divestment pipeline, with almost half of it coming from China.

Maintain BUY with an unchanged TP of S$3.68. No change in our estimates. Our SOTP-derived TP represents an upside of 25.3% and a forward P/E of 18x.

• 1H23 revenue of S$1.345bn (-0.7% YoY) was slightly below our estimates, forming 41% of our FY23e forecast. This was due to a 3.6% decline in contribution from the Real Estate Investment Business (REIB) as there was loss of contribution from properties divested in 2022, as well as lower contribution from properties in China. It was partially offset by higher Fee Income-related Business (FRB), which was up 2.4% YoY supported by stronger fees from lodging management.
• 1H23 PATMI of S$351mn (-18.9% YoY) was below our FY23e estimates at 28% due to lower portfolio gains from asset recycling, higher finance costs and absence of event-driven performance fees from two private funds exited in 1H22.
• Upgrade to BUY with a lower SOTP TP of S$3.68. We lower FY23e/24e earnings by 17% to account for higher finance costs, lower portfolio gains, and lower margins from FRB. Our SOTP-derived TP of S$3.68 represents an upside of 22.9% and a forward P/E of 15x. We like CLI for its robust recurring fee income stream and asset-light model. Immediate catalyst for CLI is a stronger China recovery.

The Positives

+ Lodging segment star performer. 1H23 lodging management fee-related income grew 35% YoY to S$159mn due to higher room rates as well as improved occupancy across the portfolio. Portfolio RevPAU grew 32% YoY to S$87 and was 106% of 1H19 pre-COVID levels. CLI has a target to reach S$500mn in lodging management fees within five years.

+ Recurring fund management fees grew 10% YoY to S$183mn in 1H23.  This alleviates the impact of lower event-driven fees (-65% YoY) in a market that is less conducive for deal-making. CLI has S$1.3bn in acquisitions from listed and private funds yet to be reported in Funds Under Management (FUM), as well as S$8.5bn in committed but undeployed capital in private funds that could lift fee income if deployed; it has a current FUM of S$89bn.

+ Managed to raise funds in a market battered by high interest rates.  CLI raised S$3.2bn of committed equity for its private funds YTD (S$2.5bn for whole of FY22) – it established a new fund, CapitaLand India Growth Fund 2, mandated to invest in Grade A business parks in India.

It also raised S$986mn of new equity in its CapitaLand China Opportunistic Partners Programme and S$150mn in its CapitaLand Open End Real Estate Fund.

The Negative

- REIB revenue declined 3.6% YoY to S$932mn, due to lower contribution from China properties and absence of income contribution from properties divested in 2022. It is unlikely that CLI will be able to hit its S$3bn divestment target for FY23 with only S$839mn of divestments YTD in this challenging environment.