Brokers’ take: OCBC lifts fair value estimate for CapitaLand Investment on more expected divestments 

OCBC Investment Research has lifted its fair value estimate on CapitaLand Investment : 9CI 0% (CLI) to S$4.05 from S$3.74 upon fine-tuning its assumptions and rolling forward its valuations on the stock. 

The research house continues to rate CLI at “hold”, but views the index counter as a potential beneficiary of China’s faster-than-expected reopening. 

In a report on Thursday (Jan 26), OCBC’s research team said it is expecting more divestment of assets by the real estate investment manager, having nearly reached its annual divestment target of S$3 billion in 2022 despite challenging capital markets and an elevated interest rate environment. 

“We expect management to target more divestment of assets held on its balance sheet in 2023, including to its listed real estate investment trusts and business trusts and private funds, which would then increase its funds under management (FUM),” the team said. 

Noting that a significant portion of CLI’s real estate assets under management and FUM are from China, the brokerage expects China’s reopening to drive CLI’s recovery efforts. 

“CLI had to defer a sizeable amount of capital recycling activities and fund launches in 2022 due to lockdowns in China,” recalled the research team. 

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With the loosening of Covid restrictions as well as the resumption of activities such as due diligence exercises and site tours, the brokerage anticipates an improvement in the operational performance of retail malls in the country. 

Aside from likely improvements in CLI’s retail segment ahead, the research team also noted a “more meaningful recovery” in the group’s lodging management business, which had been adversely affected by the pandemic. 

It also likes the stock for its high environmental, social and governance ratings – particularly its above-industry-average score for governance.  

Units of CLI closed 0.8 per cent or S$0.03 higher at S$3.98 on Friday.