UOBKH, Maybank initiate ' buy' on CapitaLand Investment

UOB Kay Hian (UOBKH) and Maybank Securities have both initiated coverage on CapitaLand Investment (CLI) with " buy" calls and target prices of S$4.02 and S$4.30 respectively.

According to a research report on Thursday (Feb 10), UOBKH analyst Adrian Loh sees potential for growth to continue in CLI' s fund management platform due to its " impressive" track record and role as one of Asia' s largest real estate investment managers (Reim).

Loh forecasts a 39 per cent increase in earnings over the 2021 to 2023 period on the back of funds under management (FUM) growth and normalisation of investment property earnings.

CLI' s FUM is expected to reach its target of S$100 billion by 2024, indicating a 6.4 per cent compound annual growth rate (CAGR) over the 2020 to 2024 period, the analyst said.

In Loh' s view, the Reim is a proxy to reopening after the Covid-19 peak as it has about 83 per cent of its assets under management in traditional real estate segments such as office, lodging and retail. Following a recovery in lodging due to exposure to long-stay assets, and as global travel resumes, the analyst anticipates an upside for CLI.

However, Loh said CLI' s valuations appear inexpensive compared to its global and regional peers with a price-to-net asset value ratio of 1.4 times and an enterprise value to earnings before interest, taxes, depreciation, and amortisation ratio (EV/Ebitda) of 21.1 times

In contrast, Maybank sees CLI' s valuation as attractive compared to its global peers, at 1.1 times price-to-book ratio and 13 times expected EV/Ebitda.

Maybank' s target price of S$4.30 is also significantly higher than UOBKH as analyst Chua Su Tye views CLI' s valuation as compelling with its sharpened focus to drive FUM and fee income growth.

The target price implies a price-to-book ratio of 1.25 times for FY2022. Chua said it is justified as he estimates return on equity (ROE) to improve to 10 per cent by FY2023, compared with the average ROE of 6 per cent for the past 3 years.

In a separate research note on Wednesday, Chua said CLI is " forging a new growth path" and he sees significant room for earnings growth and multiple expansion.

Like Loh, Chua believes CLI has a strong base to accelerate its FUM growth due to its entrenched Reim platform, its global reach of private capital partners and its access to CapitaLand' s assets.

He projects FUM fee income to increase by an 18 per cent CAGR by FY2023, supported by accelerated third-party fundraising and a recovery in its lodging business alongside a global reopening.

He added that he sees potential for CLI to narrow the performance gap of its private equity fund management business to its peers as it focuses on growing new economy exposure, streamlining its balance sheet and driving a higher FUM fee rate.

In a report on Wednesday,  Jefferies also initiated " buy" on CLI with a target price of S$4, citing its growth of private funds and lodging business, recovery of pandemic-hit sectors and pivot to new economy assets as factors underpinning its future growth.

 

CapitaSpring obtains TOP, secures 93% in leasing commitment 

INTEGRATED development CapitaSpring has received its temporary occupation permit (TOP) in end-2021, marking the end of its construction, the manager of CapitaLand Integrated Commercial Trust (CICT) said on Wednesday (Feb 9) in a regulatory update. 

The 51-storey integrated development at 88 Market Street has 673,000 square feet (sq ft) of workspace and retail net lettable area (NLA) combined, of which 93 per cent has secured leasing commitment. It is the only Grade A office development in the Raffles Place Central Business District completed in 2021. 

CapitaSpring is jointly owned by CapitaLand Development, CICT and Mitsubishi Estate. It will house multinational companies from various industries, including banking, financial services, real estate, legal and hospitality sectors, among others.

These include JPMorgan - the development' s first and largest tenant which signed up in early 2018 - as well as Sumitomo Mitsui Banking Corp and property consulting group JLL. Tenants have started moving in progressively from Q4 2021. 

CapitaSpring is a recipient of the Building and Construction Authority (BCA) Green Mark Platinum Award and the BCA Universal Design Mark GoldPLUS Award. 

More than 69,100 sq ft or 10 per cent of CapitaSpring' s office space is dedicated to flexible workspaces. There will be 299 units of serviced residences on levels 9 to 16, while the Market Street Hawker Centre will return to occupy levels 2 and 3.

The integrated development also houses Singapore' s tallest sky observatory deck and urban farm at 280 metres, as well as a 35-m-tall botanical promenade located 100 m above ground, which will be opened to the public. 

Tony Tan, chief executive of CICT' s manager, said CapitaSpring' s achievement of securing 93 per cent in leasing commitment was a " notable" outcome at the point of TOP for a building of its scale, and " commendable" in the context of the ongoing Covid-19 pandemic. 

" The positive market reception for CapitaSpring reinforces our confidence that offices continue to remain an integral part of companies' workplace strategies," he added.