SINGAPORE - CapitaLand Investment (CLI), a global real asset manager with a strong Asia foothold, sank into the red for the second half of 2023 due to revaluation losses on its investment properties, particularly in China and the United States.
For the six months to Dec 31, it saw a net loss of $170 million, from a net profit of $428 million a year earlier. Revenue slipped 5.5 per cent year on year to $1.4 billion from $1.5 billion over the same period, the company reported on Feb 28.
CLI’s bottom line was hit by a $600 million revaluation and impairment loss in the second half of 2023, compared with a $30 million gain in the same period in 2022. This was mainly due to weaker rents in China and capitalisation rate expansion in the US.
Excluding this, CLI’s cash profit after tax and minority interests (Patmi) would have risen 8 per cent to $430 million from $398 million.
For the full year, net profit sank 79 per cent to $181 million from $861 million in 2022. Revenue slipped 3.2 per cent to $2.8 billion from $2.9 billion as a result of lower corporate leasing income in the US and lower rental revenue from properties in China.
CLI’s total Patmi for 2023 was impacted by non-cash fair value losses from the revaluation of its investment properties, particularly in China due to weaker rents and in the US due to capitalisation rate expansion.
CLI chief financial officer Paul Tham said that higher interest rates in the US have resulted in the widening of capitalisation rate, basically a measure of a property value and its yield.
Looking ahead, the group’s property valuation hinges on the interest-rate outlook, he said.
With operating cash flow remaining steady, the board has proposed a core dividend of 12 cents per share for 2023, unchanged from 2022 and 2021.
CLI chairman Miguel Ko said the group raised $2.8 billion in third-party capital last year. This was up from $2 billion in 2022.
He added that CLI remains focused on executing its strategy to grow asset-light fee income-related earnings, build its fund and lodging management track record, and expand its network of global institutional investors and capital partners.
“With its disciplined capital management and strong balance sheet, CLI is well-positioned to diversify its global portfolio and pursue merger and acquisition opportunities to accelerate its growth momentum,” he said.
Group chief executive officer Lee Chee Koon said CLI is targeting to double its funds under management to $200 billion in the next five years by 2028.
He said CLI plans to “speed up its pace of organic growth across its businesses, complemented by inorganic opportunities” to meet its new target.
“We will continue to bolster growth in our listed funds through active portfolio management, and further expand our operations and fund management in India and South-east Asia. We will also optimise our China portfolio and grow renminbi-denominated funds, as well as increase our fund product offerings in Japan, South Korea, Australia and beyond,” he said.
CLI cash balances as at Dec 31 included $1.1 billion held by the company and its treasury vehicles comprising CLI Treasury and The Ascott Capital.
Mr Derek Tan, a DBS analyst, is optimistic about CLI’s prospects, citing its scalable fee-related earnings and funds under management platform for growth. He kept his buy call on the stock with a 12-month target price of $4.25.
“With diverse real estate strategies ranging from opportunistic, value add to core investment, we see CLI leveraging opportunities in both market upcycles and down cycles... ensuring consistent and visible growth profiles,” he said.
CLI ended at $2.78 a share, up 4 cents, on Feb 28.
