CapitaLand Investment H2 profit falls 33.8% on lower asset recycling activities, foreign exchange losses
DESPITE turning in a weaker financial performance for the six months ended Dec 31, 2022, CapitaLand Investment (CLI) remains “cautiously optimistic” about the coming year, especially with China’s reopening.
The property giant reported a net profit of S$428 million in H2 2022 – a 33.8 per cent drop from the S$647 million chalked up the year before – largely due to lower gains from the revaluation of investment properties and asset recycling.
Its bottom line also took a hit from foreign exchange losses amounting to S$85 million, a consequence of a stronger Singapore dollar.
This came despite a 22.3 per cent increase in revenue to S$1.5 billion, bolstered by strong operating performance from CLI’s lodging properties as international travel recovers.
Among its four key sectors, the group’s lodging operations has now emerged as a significant contributor to earnings, making for 38 per cent of the group’s H2 FY2022 Ebitda (earnings before interest, taxes, depreciation), from the previous year’s 26 per cent.
“This is great from a fee-income perspective because it is a good, steady recurring income from our budget management,” said chief financial officer Paul Tham at an earnings briefing on Thursday (Feb 23) morning.
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For the full year ended Dec 31, 2022, CLI’s board has proposed a core dividend of S$0.12 per share and a special dividend-in-specie of 0.057 CapitaLand Ascott Trust units per share – valued at S$0.059 apiece. This brings the total dividend for the year to S$0.179, with a total payout of about S$918 million.
Net profit for FY2022 was down 36.2 per cent to S$861 million, compared with S$1.3 billion in the previous year, translating to an earnings per share (EPS) of S$0.168 from S$0.383. Revenue was up 25.4 per cent to S$2.9 billion from S$2.3 billion, buoyed by higher contributions from the group’s fee income-related businesses and real estate investment business.
Fee income-related businesses revenue grew 6 per cent year on year to S$955 million, due to higher fee-related earnings from private funds and lodging management.
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As at end-2022, the group had 159,000 lodging units under management, up around 20 per cent from the 133,000 units in FY2021. Revenue per available unit also climbed 40 per cent to S$95, close to pre-pandemic levels.
Real estate investment business revenue was also up 40 per cent on year to S$2.1 billion, as occupancy and room rates for lodging properties improved.
CLI group chief executive Lee Chee Koon said the company’s FY2022 results were impacted by rising interest rates and China’s zero-Covid approach. This led to lower capital recycling activities and higher rental rebates to support China tenants.
“With the return of our ability to recycle capital in China as the country overcomes the worst of its Covid-19 situation, our underlying business is showing encouraging signs of recovery, and we stand ready to act on the right opportunities as we pursue long-term growth sustainably,” he said.
Still, Lee expects recovery to be steady as China – a core market for CLI – reopens post-pandemic.
For one, travel and leisure demand has turned the corner in the country, he said. CLI also remains well positioned to tap into China’s domestic capital, which Lee believes represents a deep pool of investible capital.
“We are going to continue investing in China very significantly,” he said. “We have to take things in perspective and look at the spending power of the domestic market. Which other market has such a big middle class earning good salaries?”
Separately, the group said that it has committed S$1.1 billion in equity for a new programme to invest in “special situation opportunities” in China.
The new CapitaLand China Opportunistic Partners Programme comprises a S$291 million single-asset fund and an S$824 million programmatic joint venture, CLI said.
Together with its recently launched CapitaLand China Data Centre Partners, this brings CLI’s embedded funds under management to S$96 billion, a hairbreadth from its target of S$100 billion by 2024. And if not for the foreign exchange losses, this target would have been long surpassed, said Tham.
CLI was trading 1.6 per cent or S$0.06 lower at S$3.79 as at 5.04 pm on Thursday.
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