CapitaLand Investment: Reinitiating Coverage; Asset-Light Shift Capping Near-Term Growth

We resume coverage of CapitaLand Investment, or CLI, with a no-moat rating and a fair value estimate of SGD 3.50 per share. This implies a 2024 price/book ratio of 0.96 times and a price/earnings ratio of 30 times. We expect the firm to continue its shift to an asset-light model, by divesting or injecting its investment properties held on its balance sheet into its managed funds. However, we think the shift will impede earnings growth for the firm during our forecast period as the gain in management fees cannot fully offset the loss in contribution of divested assets. That said, we expect the firm’s recurring fee income and rental income to underpin a steady earnings profile through economic cycles. We think the shares are currently undervalued as it trades at a 13% discount to our fair value estimate. We like its fund management business which enables it to retain long-term operational control of its assets while capturing recurring fee income.