CapitaLand Investment to rebalance portfolio, grow India and South-east Asia businesses

SINGAPORE – CapitaLand Investment (CLI) will rebalance its portfolio to grow its India and South-east Asia businesses and optimise its China holdings, as it seeks further geographical diversification for growth.

The group said on Nov 22 that it also plans to “leverage M&A (mergers and acquisitions) to grow in our focus markets of Japan, Korea and Australia, and look to ex-Asia developed markets such as the US and Europe next”.

The asset management group aims to double funds under management (FUM) from $102 billion, as at the third quarter of 2023, to $200 billion in financial year 2028.

It expects China’s contribution to its FUM to moderate, it told investors.

As CLI ramps up in other markets, China contributions will be reduced to between 10 per cent and 20 per cent by financial year 2028. This is down from 27 per cent of CLI’s FUM as at Nov 21.

Growth in China will be driven by CLI’s renminbi funds, lodging business, as well as investment opportunities arising from special situations, the group said.

Mr Lee Chee Koon, group chief executive at CLI, said: “As we pivot to become an asset-light global real asset manager, we are actively managing our balance sheet and have made creditable progress in our capital recycling efforts.”

He noted that, since 2021, the group has recycled $24 billion, out of which about $11 billion came from China. The group’s China business has also raised nearly 50 billion yuan (S$9.3 billion) in domestic capital since 2021, he said.

But Mr Lee cautioned that CLI is likely to “face challenges as we reconstitute our portfolio in China in the short term”.

While CLI’s real estate investment business (Reib) continues to contribute to its bottom line, the group said earnings are “impacted by non-operating movements”.

It warned of potential fair value or divestment losses, such as from China, which could impact non-operating earnings in the near to medium term.

In 2023, CLI China’s return on equity stood at minus 8 per cent, and this metric will continue to be under pressure, the group said.

For the nine months ended September, CLI’s Reib generated revenue of $1.42 billion, down 2 per cent from $1.44 billion in the previous corresponding period.

The decline was mainly due to divestments in India, Australia and France, which led to lower Reib revenue in their respective geographic segments.

The group expects Reib income to contribute to 30 per cent to 40 per cent of its earnings. This will be led by higher earnings from private funds and warehousing of products such as credit that generate double-digit returns, CLI said.

Total revenue for the nine-month period amounted to $2.1 billion, representing a slight improvement from $2.09 billion in the prior year. This comes as contributions from fee income-related business grew 6 per cent on the year to $845 million.

This segment is also expected to contribute 60 per cent to 70 per cent and improve overall quality of CLI earnings in the future, the group said.

Shares of CLI were up three cents to $2.82 at the close of trading on Nov 25.

THE BUSINESS TIMES