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CapitaLand Investment posts FY2023 earnings decline of 79% to $181 mil

Earnings and revenue down for CapitaLand Investment in FY2023. Core dividends of 12 cents proposed.

CapitaLand Investment (CLI) announced that its earnings or Patmi for FY2023 ended Dec 31, 2023 has declined by 79.0% y-o-y to $181 million from $861 million in FY2022.

The challenging environment has negatively impacted valuation of the group’s investment properties, particularly those located in China, the USA and the UK, as well as dampened fund raising appetite globally. Nonetheless, through active asset recycling efforts, the group generated $213 million of portfolio gains at the Patmi level, a 4% decline from last year.

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Operating Patmi declined by 7% y-o-y to $568 million, mainly due to higher interest expense, lower contribution from China and lower event driven fees from funds. These were partially mitigated by the absence of foreign exchange losses recognised in FY2022, as well as better contribution from the lodging business.

Cash Patmi, comprising operating Patmi and portfolio gains from asset recycling, came in at $781 million for FY2023, attributable to operating Patmi and stable portfolio gains from divestments of $2.1 billion.

Overall revenue declined by 3.2% y-o-y to $2.78 billion from $2.88 billion last year, mainly due to lower corporate leasing income from Synergy in the USA and lower rental revenue from prop

Fee income-related businesses (FRB) revenue, which have been providing strong recurring contributions to the group’s overall returns y-o-y, gained 9% to $1.07 billion from $984 million a year ago, anchored by higher contributions from lodging management and commercial management.

In terms of geographical segment, the group’s two core markets, Singapore and China, accounted for 36% of total revenue. The remaining revenue were contributed by other developed markets (52%) and other emerging markets (12%).

Ebitda for FY2023 declined 44% y-o-y to $1.10 billion primarily due to losses from the revaluation of investment properties and lower gains from asset recycling. The group’s Ebitda of $1.46 billion from operations was marginally lower than FY2022 of $1.48 billion, impacted by the loss of contribution from divested assets last year in Singapore, Korea and China, lower contribution from China due to lower occupancy and rental rates, as well as lower event driven fees from funds. These were partially mitigated by the absence of foreign exchange losses recognised in FY2022 and improved performance from the lodging business.

Ebitda from portfolio gains in FY2023 of $198 million arose mainly from the divestments of hospitality assets in France, London, Dublin and Jakarta, a business park in India, a retail mall and an office property in China, as well as a logistic property in Japan.

As at Dec 31, funds under management (FUM) stood at $99 billion. This is an increase of $7 billion y-o-y, mainly due to the acquisition-led growth of CLI’s listed and private funds, additional capital raised from existing funds, as well as the establishment of new funds during the year.

As it approaches its FY2024 deployed FUM target of $100 billion, CLI also announced on Feb 28 it will target to double its FUM to $200 billion in the next five years. To date, CLI’s deployed and committed FUM stood at $100 billion. This includes close to $10 billion of funds ready for deployment based on committed capital on a leveraged basis. The increase was mainly due to the acquisition-led growth of CLI’s listed and private funds, additional capital raised for existing funds, as well as the establishment of new funds during the year.

Lodging management FRE for FY2023 increased 28% y-o-y to $331 million with nearly 9,600 units turning operational. Riding on robust rebound of international travel, RevPAU grew 20% from a year ago to $91, driven by higher occupancy and average daily rates across most geographies

Meanwhile, for the 2HFY2023 period, losses came in at $170 million, compared to earnings of $428 million a year ago.

Amidst a challenging macroeconomic environment, the group’s revenue for 2HFY2023 decreased 5.5% y-o-y to $1.44 billion from $1.52 billion last year. The decline in rental income from investment properties were partially mitigated by the growth in fee related earnings (FRE). The drop in rental income was mainly due to lower corporate leasing demand in the USA and lower rental revenue from properties in China. On the other hand, FRE grew on the back of new management contracts secured and higher FUM.

Share of results from associates in 2HFY2023 was a loss of $7 million as compared to a profit of $193 million in 2HFY2022, mainly due to fair value losses from the revaluation of investment properties as well as lower share of profits from associates in China. Share of results from joint ventures for 2HFY2023 decreased 57% y-o-y to $26 million, mainly due to lower gains from the revaluation of investment properties as well as lower contributions from the group’s joint ventures in China.

The group generates portfolio gains (defined as gains/losses arising from divestments, gains from bargain purchases or re-measurement on acquisitions and realised fair value gains/losses from revaluation of investment properties to the agreed selling prices of these properties) from asset recycling activities. Portfolio gains or portfolio Patmi for 2HFY2023 came in at $206 million, higher than $135 million the same period a year ago.

The board has proposed a core dividend of 12 cents per share.

.Miguel Ko, chairman of CLI says: “CLI remains focused on executing its strategy to grow asset-light fee-income related earnings, build its fund and lodging management track record, and expand its network of global institutional investors and capital partners. In FY2023, we raised $2.8 billion in third-party capital, up from $2.0 billion in FY 2022. With its disciplined capital management and strong balance sheet, CLI is well-positioned to diversify its global portfolio and pursue M&A opportunities to accelerate its growth momentum.”

Lee Chee Koon, group CEO of CLI says: “espite headwinds in the macroeconomic environment, CLI was able to scale up our lodging and new economy businesses and make strides in fund management and third-party commercial management. Looking ahead, we are confident of our strategies in moving towards a new target to double CLI’s FUM to S$200 billion by end 2028. CLI plans to accelerate its pace of organic growth across its businesses, complemented by inorganic opportunities, to meet its new FUM target.”

“We will continue to bolster growth in our listed funds through active portfolio management, and further expand our operations and fund management in India and Southeast Asia. We will also optimise our China portfolio and grow Renminbi-denominated funds, as well as increase our fund product offerings in Japan, South Korea, Australia and beyond. While we strive towards a new growth target, we will be disciplined in driving growth that will deliver high quality and consistent earnings for our LPs and investors,” adds Lee.

Shares in CLI last traded at $2.74 on Feb 27.

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