Earnings season for the first quarter of 2023 is coming to a close in Singapore but last week, one of Singapore’s biggest property managers reported its Q1 2023 results.
I’m talking about, of course, CapitaLand Investment Ltd (SGX: 9CI). The company – formerly known as CapitaLand Limited – restructured itself back in 2021.
CapitaLand Investment continues to be a component stock of Singapore’s benchmark Straits Times Index.
Let’s find out how the big Singapore property management firm performed in its most recent quarter.
Fee-related revenue falls 3%, offset by real estate business
Post-its restructuring, CapitaLand Investment is much more focused on generating profits from its more predictable fee income-related business (FRB) in areas such as lodging, property management and fund management.
Revenue from its FRB arm saw a 3% year-on-year decline to S$255 million. However, excluding a one-off S$31 million performance fee for a Singapore and Vietnam fund in Q1 2022, revenue would have been up 10% in Q1 2023.
Meanwhile, CapitaLand Investment’s real estate investment business (REIB), which includes its holdings in many S-REITs, saw its revenue rise 11% year-on-year to S$447 million.
The company continues to see strong capacity for capital recycling and has group cash and undrawn facilities totalling S$5.8 billion.
CapitaLand Investment stated that all its Singapore asset classes saw healthy positive rental reversions and strong occupancy in Q1 2023.
Elsewhere, China’s reopening recovery continues as seen by improving shopper traffic and tenants’ sales.
In India, where it has interests, committed occupancy remains robust and physical occupancy increased during the period.
Lodging management sees strong recovery, new revenue target
In terms of its sub-divisions under FRB, CapitaLand Investment’s lodging management division performed strongly.
The sustained travel recovery in China saw a huge 42% year-on-year rise in Revenue Per Available Unit (RevPAU) to S$81 (see below).
Source: CapitaLand Investment Q1 2023 business update presentation
It was no surprise to see that China’s reopening – following a couple of years of strict pandemic lockdowns – spurred the higher occupancy and RevPAU figures.
With Singapore in a hugely advantageous position to benefit from returning Chinese visitors, via increased flight capacity, it makes sense that CapitaLand Investment’s lodging business should continue to perform well in the next few quarters.
Management also announced a new five-year revenue target for its lodging business where it aims to more than double fee revenue from S$258 million (in FY2022) to over S$500 million in five years’ time.
The company said they would achieve this by focusing on quality growth using an asset-light strategy. Over 80% of its units are now under management and franchise contracts – up from 43% a decade ago.
CapitaLand = Capital recycling machine
Investors shouldn’t forget that while CapitaLand Investment does have a huge amount of assets on its books, at the end of the day the company is a capital allocator and recycler.
Indeed, in Q1 2023 it divested S$35 million worth of assets and invested in a gross S$1.4 billion worth of assets.
The firm’s FY2023 target of S$3 billion worth of divestments remains unchanged. So far in 2023, CapitaLand Investment’s shares have declined by nearly 9%.
Based on its FY2022 ordinary dividend per share (DPS) of 12 Singapore cents, the company’s stock gives investors a dividend yield of 3.5%.
Disclaimer: ProsperUs Head of Content & Investment Lead Tim Phillips doesn’t own shares of any companies mentioned.
