Every man has just one destiny.
Every company has just one destiny.
And this Singapore blue-chip has just one destiny.
And you know what? CapitaLand Investment Management (SGX: 9CI) is destined to be one of the biggest property investment firm in the world.
So far, the stock market agrees with me (and here’s what you need to know)
At S$19 billion market cap, CLIM is an “asset-light” property investment firm, shedding its old CapitaLand property developer skin. Today, CLIM manages assets for a fee. It also owns and operates properties all over the world.
Think of The Blackstone Group, Brookfield Asset Management, Global Logistics Properties and so on.
How does this Singapore blue-chip make money?
CLIM has two big revenue engines.
The first: fee-income business. It’s a simple, straightforward model. CLIM doesn’t own any assets. Instead, they manage these assets for a fee. Just like portfolio managers to their stocks.
For a fee, CLIM runs the property’s day-to-day operations. For a fee, CLIM makes sure rents are collected on time. For a fee, CLIM tries to lock-in quality tenants.
This is what’s important — growing CLIM’s assets under their management. Because the more properties CLIM manages, the more fees it collects.
By 2024, CLIM wants to manage at least S$100 billion worth of property assets. Last year, CLIM produced S$905 million of revenues (see chart below), simply managing S$84 billion of property assets.
Not too bad.
So far, CLIM collects fees from six Singapore REITs — Ascott Residence Trust, CapitaLand Integrated Commercial Trust, Ascendas REIT, CapitaLand China Trust, Ascendas India Trust and CapitaLand Malaysia Trust.
These are listed funds.
And there’s more.
Source: CLIM’s FY2021 Presentation Slides
CLIM owns private funds they collect fees from. It also collect fees from private serviced residences, hotels and student accommodations units.
In fact, CLIM said it wants to manage 160,000 of these units by 2023. Today it manages 133,000 units.
CLIM’s fee-income business is a stabilizing force for its other revenue driver…
The Hamster Wheel
This is CLIM’s Real Estate Investment Business (REIB). What’s that? Unlike their fee-income business, CLIM owns the properties in REIB.
CLIM works closely with property developers, buy out completed properties, then run the operations. The three big markets are China, India and Singapore. When the price is right, CLIM sells these properties for a fat profit. CLIM recycles profits back into new projects.
That’s what keeps the hamster wheel running.
Sometimes, you get good profits.
Sometimes, not so good profits.
Overall — lumpy, enormous profits. In its latest financial year results 2021, CLIM produced S$2.2 billion of revenues, net profits of S$1.3 billion. Of its net profits, S$616 million came from its hamster wheel business.
Not bad for its first year of CLIM’s operations as a listed company.
In fact, CLIM wants to S$3 billion worth of assets every year. In its latest report, they have about S$20 billion of assets today. There’s massive potential.
The only problem? Competing with other property giants to buy high-quality properties across the world. Not that easy.
Then again, the stock market doesn’t care much about competition.
Shares have traded about 27% higher.
And here’s the more interesting thing…
Source: CLIM’s FY2021 Presentation Slides
For a fund management business, CLIM’s shares trade close to its book value, or net asset value (NAV). It looks cheap to me. Many investment funds trade above its book value. This is because the stock market like such asset-light businesses.
But more importantly, property management businesses scale.
Net asset value is the book value of the company. It’s the number figured out by accountants. And accountants tell you what these properties are worth on paper.
Any Dividends?
CLIM paid 15 cents per share dividends last year — dividend yield is about 4%. Before it became CLIM, the company paid 9 cents per share dividends.
Looks like this can be a decent dividend play. Which means also there’s also some form of price stability in the stock.
Dividend stocks typically don’t trade as violently as growth stocks.
Will This Singapore Blue-Chip Be Affected by Russia-Ukraine crisis?
As much as I hate political wars, it’s hard for CLIM to be trapped in the Russian-Ukraine crisis. CLIM’s two biggest market is China and Singapore.
And that already accounts for 61% of its total profits. The other 36% comes from developed countries include U.K., U.S. and Australia.
Source: CLIM’s FY2021 Presentation Slides
Actually, I like CLIM’s business because management is completely transparent with their financial numbers. That’s a huge plus for investors.
Most of the time, investment firms are secretive in their operations. CLIM gives a refreshing view on investment firms.
Sometimes investing can be simple.
Willie Keng, CFA
Founder, Dividend Titan
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HI Willie .. agree with your well analyzed report. This reborn Capland with its asset light model would be flying higher. A dividend play with potential capital upside. Hope to see you on the other side .
Thanks Philip 🙂 reborn indeed!
Hi Willie, do u think its currently overvalued?
Hi Catherine,
CLIM trades at 1.19x P/B. It’s slightly higher than its current NAV. I don’t think it’s overvalued at this point. Many asset-light investment firms in the U.S. trade higher. Heck, our banks have a much higher valuation!
Willie
Thank you for the reply!