SEVERAL research houses have scaled back their target prices for real estate investment manager CapitaLand Investment : 9CI 0% (CLI) but remain positive on its valuation and earnings prospects.  

Maybank Securities cut its price target to S$3.50 from S$3.65, while upgrading its call to “buy” from “hold” on the view that CLI’s risk-reward profile is now favourable. 

The lower price target comes in the wake of updated FY2023 earnings before interest, taxes, depreciation, and amortisation (Ebitda) forecasts, as well as revised valuations for the group’s stakes in private funds and listed real estate investment trusts (Reits). 

The brokerage has cut its FY2023 and FY2024 Ebitda estimates mostly for fund management after the segment’s H1 financials were affected by lower performance fees and slow deployment. 

It however noted a rebound in the lodging business, and raised its near-term Ebitda estimates for this segment. 

On Monday (Aug 14), analyst Krishna Guha said the rating upgrade is based on CLI’s “rebounding lodging business, steady stream of fees from an asset-light business model, policy support in China, plateauing interest rates, and reasonable valuation”. 

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This is despite continued headwinds and a lack of catalysts, in his view. 

While CGS-CIMB maintains its “add” recommendation, the brokerage has likewise lowered its target price to S$4.30 from S$4.50 after also cutting its estimates for FY2023 to FY2025 to account for a slower asset monetisation environment. 

On Friday, CGS-CIMB analyst Lock Mun Yee said the current cautious dealmaking environment, amid a slower-than-expected China recovery is likely to drag on CLI’s near-term asset recycling and capital deployment activities. 

She nonetheless continues to like CLI for its “strong recurring fee-income base, which provides good visibility, and its asset-light fund management model”. 

“Looking ahead, we believe fee-related business revenue could pick up moderately in H2 FY2023, with CLI announcing S$1.3 billion of acquisitions by its listed and private funds (after) June 2023,” added Lock. 

In the same vein, UOB Kay Hian (UOBKH) reduced its target price to S$4.25 from the previous S$4.27.

This comes after it also lowered its near-term estimates to account for higher-than-expected financing costs, lower Ebitda margins for the fund management business, and a slower recovery for its China properties. 

Although CLI’s latest set of H1 results fell short of UOBKH’s and consensus expectations, its analyst Adrian Loh believes the group will “turn the corner soon” based on its latest capital recycling achievements. 

Loh also highlighted CLI’s outstanding performance in its lodging segment, which the analyst said was a “key highlight” of the group’s first half financials.  

“High interest rates continue to be a burden on deal-making (for CLI) and its capital recycling target will likely be missed. However, we note the steady contribution of its fee-related earnings,” said the analyst. 

Shares of CLI were down 2.5 per cent or S$0.08 at S$3.10 as at 2.40pm on Monday.