CapitaLand Investment H1 profit falls 6% to S$331 million
Revenue is up 1 per cent to S$1.37 billion for the half year
CAPITALAND Investment (CLI) posted a 6 per cent fall in net profit to S$331 million for the six months ended Jun 30, from S$351 million the year before.
CLI’s earnings per share for H1 also declined 6 per cent to S$0.065, from S$0.069 previously.
Revenue was up 1 per cent to S$1.37 billion for the half year, from S$1.35 billion in the corresponding period the previous year.
The group’s performance comes against the backdrop of a challenging operating environment, with higher-for-longer interest rates, geopolitical tensions and macroeconomic uncertainties, CLI’s group chief executive officer Lee Chee Koon said on Wednesday (Aug 14) at a results briefing.
For instance, fee-related revenue rose 8 per cent year on year to S$561 million for the half-year period, from S$519 million a year ago.
CLI said this was underpinned by improved asset performance and contributions from new management contracts in its lodging and commercial management business. Its fund management business also contributed to the revenue growth, on the back of higher event-driven fees.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
The growth in fee-related revenue was, however, offset by the group’s real estate investment segment, which recorded a 2 per cent dip to S$911 million, from S$932 million the previous year.
CLI attributed the drop to higher interest expenses and foreign exchange losses, as well as lower contributions from divested properties in China, Australia, France, India and Singapore.
Overall, earnings before interest, tax, depreciation and amortisation rose 8 per cent to S$819 million in H1, from S$757 million previously. This was mainly due to higher portfolio gains from asset-recycling activities.
Portfolio gains rose to S$35 million in H1, from S$7 million the year before. This was driven by completion gains from earlier divestments, as well as participation in distribution reinvestment plans from CapitaLand Integrated Commercial Trust and CapitaLand China Trust.
At the briefing, CLI group chief operating officer Andrew Lim said that capital recycling remained a priority for the group and a key lever for growth.
“We want dry powder for what we think is coming,” he said. “We want to see new products, we want to pay down expensive debt, and we want to potentially buy back shares. For these four reasons, capital recycling takes priority over maximising portfolio gains.”
In the year thus far, CLI unlocked S$1.7 billion – out of an annual capital recycling target of S$3 billion – to redeploy for growth.
Proceeds from capital recycling can then be used to seek new opportunities in other markets, said Lim.
He cited the group’s recent announcement at the first close of its sixth onshore renminbi fund – China Business Park RMB Fund III – as an example.
CLI will divest one of its Chinese assets, Ascendas iHub Suzhou, as a seed asset to the fund. It also secured an initial equity investment of 1.2 billion yuan (S$222 million) from an undisclosed institutional investor to invest in China’s business park sector.
When fully deployed, the fund is expected to add two billion yuan to CLI’s funds under management, which currently stand at S$100 billion.
Such active capital recycling is key for the group to build a more balanced and diversified portfolio, with no more than 20 per cent of its capital in any market apart from Singapore, Lee added.
Lim highlighted the importance of reducing CLI’s financial exposure in China, while growing its capabilities in key markets that are currently underweight, such as Japan, South Korea and Australia.
“We find ourselves... in this deglobalised multipolar system that I think is going to stick around for a while,” said the chief operating officer.
“If you put all your eggs, or too many eggs, in one basket, you run a disproportionate risk (of getting) yourself into trouble.”
CLI is therefore eyeing the lodging and data centre industries in Japan, which seem promising, said Lim. He also noted South Korea’s Grade A office sector, which remains highly sought-after and “chronically undersupplied”, although the group must be careful of overpaying due to high interest rates.
There are also structural opportunities in the credit space in both South Korea and Australia, he said.
CLI did not recommend any dividend for H1, as it pays only a first and final dividend.
Shares of CLI closed 1.6 per cent or S$0.04 lower at S$2.49 on Wednesday.
Copyright SPH Media. All rights reserved.
