Amid all the carnage in global stock markets, investors here in Singapore might have missed out on the fact that SGX-listed stocks have done relatively well.
That’s because a lot of the largest companies listed on the Singapore Exchange are either dividend-paying stocks or real estate investment trusts (REITs).
However, one of the out-of-favour sectors (which has been the case since the Global Financial Crisis) has been property developers.
That was one reason why CapitaLand Investment Ltd (SGX: 9CI) was spun out from its former listed parent CapitaLand Group.
The listed entity is more commonly known as CapitaLand Investment Management (or CLIM).
So, how have shares performed and has the spin-off been worth it for CapitaLand shareholders as well as new investors?
Property development undesirable
Effectively, investors were given exposure to CapitaLand’s fund management and lodging businesses – including REITs and Private Equity (PE) among others – while the property development arm would be privatised.
That turned out well as property development is highly cyclical, unpredictable in terms of revenue streams and also extremely prone to changes in sentiment on the back of government regulation.
Since listing its new shares in late September of last year, CLIM has provided investors with a total price return of over 30%.
CLIM stock ended its first day at S$2.95 apiece and today they sit at S$3.84. That’s been an impressive return during a period in which most stock markets have fallen.
For its FY2021 earnings, CLIM posted a full-year total profit after tax and minority interests (PATMI) of S$1.35 billion versus a loss for the former CapitaLand Group of S$559 million in FY2020.
Even better, it also paid out a higher dividend per share (DPS) of 15 Singapore cents versus the 9 Singapore cents DPS that CapitaLand Group paid out in FY2020.
Aiming to be a best-in-class capital allocator
It’s also important for investors to remember that, under the new structure, CLIM is effectively a capital allocator and recycler.
By selling lower-yielding, or underperforming assets, and recycling that into higher-yielding and better-performing real estate assets, it hopes to generate value for shareholders.
It’s been busy so far in 2022, as the real estate group outlined in its Q1 FY2022 earnings results. It has already exceeded over half of its full-year target for divestments (see below).
Source: CapitaLand Investment Ltd Q1 FY2022 earnings presentation
Fortunately, given its scale and size, CLIM has ample liquidity to fund these investments. The Group’s cash and undrawn facilities as of the end of the first quarter stood at S$8.1 billion.
With a net-debt-to-equity ratio of just 0.48x it also has reasonably healthy gearing in what is a rising interest rate environment.
Global remit helps CapitaLand Investment’s appeal
In a time of uncertainty, it has helped a great deal to be invested in a truly global real estate investment manager that is listed in Singapore.
Beyond that, the old operating model of the formerly listed CapitaLand Group – with its development arm attached – was clearly an unattractive proposition for many investors (including institutions).
Under the new model, CLIM is proving to be unlocking value for investors and shaking off the chains of the “conglomerate discount” that its old listed parent seemed to have.
Finally, with an array of stakes in listed REITs, such as CapitaLand Integrated Commercial Trust (SGX: C38U), Ascendas REIT (SGX: A17U), and Ascott Resident Trust (SGX: HMN), CLIM is serving up an appetising investment option for Singapore investors looking for both dividends and growth.
Disclaimer: PropserUs Head of Content & Investment Lead Tim Phillips doesn’t own shares of any companies mentioned.
