Brokers’ take: Maybank says CapitaLand Investment fairly valued, downgrades to ‘hold’ 

MAYBANK Securities downgraded its call on CapitaLand Investment (CLI) to “hold” from “buy” with the view that the stock’s risk-reward profile is now “more balanced” at current valuations.

The brokerage cut its price target to S$3.65 from S$4.30 after accounting for a lower market capitalisation of the group’s listed funds, as well as a 10 per cent holding company discount in its sum-of-the-parts valuation for the stock.

On Monday (Feb 27), analyst Krishna Guha said he expects the holding company discount to gradually come down as CLI recycles its balance sheet investment properties, and converts its real estate assets under management (AUM) into a fund management AUM.

Capital recycling will however be “challenging” and may only pick up in H2 of FY2023, he added.

Therefore, Maybank’s FY2023 profit after taxes and minority interests (Patmi) forecast for CLI is 38 per cent below consensus, to account for lower revaluation and portfolio gains.

Guha is also anticipating lower event-driven fees for both CLI’s private and listed funds, impacting the group’s operating Patmi.

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The analyst said he likes the stock for its restructuring story and the execution so far – along with its steady fee business and improving operations in the lodging business, as evident in the group’s FY2022 financials.

“With funds under management and room key count close to stated targets, (CLI’s) focus is likely to shift to quality of growth, improving profitability and better disclosures, especially for lodging,” Guha added.

Shares of CLI were trading S$0.12 or 3.1 per cent lower at S$3.76 as at 10.50 am on Monday.