CapitaLand Investment Earnings: Hunting For Acquisitions To Double Funds Under Management by 2028

Our fair value estimate of CapitaLand Investment, or CLI, remains at SGD 3.50, with our long-term view unchanged despite disappointing 2023 results that were negatively affected by the high interest rate environment. The group's revenue was in line with our expectations, but net profit fell 79% year on year due to SGD 599 million of fair value losses for its properties in China and the US. CLI maintained dividend per share of SGD 0.12, implying a dividend yield of 4.3% based on its last closing price of SGD 2.78 per share. While we do not expect the group to cut dividends through our forecast period, we think CLI's ongoing shift to an asset-light model will continue to impede earnings, as the gain in management fees cannot fully offset the loss in contribution of divested assets. Our top pick among real estate asset managers is ESR Group, which is currently trading at a more attractive valuation of 0.59 times our fair value estimate. We think that the business environment for real estate asset managers will improve in the second half of 2024 given expected rate cuts in the US.