CapitaLand Investment's First Half Weaker on Slower Asset Recycling

CapitaLand Investment’s first-half result was weaker, with slower asset recycling resulting in profit after tax and minority interest declining 38% year on year to SGD 433 million. Excluding the portfolio gains, revaluation and impairment, underlying operating profit after tax and minority interest increased 24% to SGD 358 million. The share price reacted negatively to the result, which in our view, is attributable to the flat assets under management, or AUM, of SGD 86 billion, on the first quarter and the end of last year, and also the outlook of AUM growth. We note the flat AUM was skewed by the closure of a Vietnam fund, at positive internal rate of return. Committed capital of SGD 3.5 billion should take total AUM to SGD 89.5 billion. Management noted that AUM growth of 10% may not be achieved for the full year as the market conditions remain challenging in mainland China, despite some relaxation policies in the real estate sector. The increase in AUM is likely to be deferred to 2023 though, and China's policy relaxation in the second half of 2022 could also see some catch-up in capital recycling. Revenue from funds management increased by 21% on the same period last year to SGD 238 million. Average fee on AUM increased by 1 basis point on last quarter, or 2 basis points on last year to 52 basis points.