CapitaLand Investment: Scaling Up in Rest of Asia-Pacific to Rebalance China Exposure

CapitaLand Investment’s first-half 2024 performance was broadly in line with our expectation. Operating profit after tax and minority interest fell 14% year on year due to weaker contribution from its real estate investment business, slightly offset by higher fee income. We raised our share of results from associates and joint venture for the group’s newly raised funds and operating income forecasts to reflect higher portfolio gains from the group’s asset divestment and participation in its REITs distribution reinvestment plan. As a result, our earnings per share, or EPS, estimates for 2024-26 were raised by 8.0% to 11.4%. However, we lowered our fair value estimate to SGD 3.30 per share from SGD 3.50 after increasing our WACC to 6.9% from 6.6% to reflect the group’s exposure in China, India, and rest of Southeast Asia, which we estimate to contribute close to 50% of its assets under management. Based on current prices, we think the group is undervalued. However, our top pick for alternative asset managers is Keppel Ltd for its exposure to the more resilient infrastructure and connectivity space.