CapitaLand Investment: Focus on Fund Management Business to Drive Medium-Term Earnings Growth

CapitaLand Investment’s, or CLI’s, third-quarter 2024 business update was slightly above our expectations. Cumulative nine-months group revenue of SGD 2.1 billion made up 79% of our 2024 revenue estimate as revenue from its real estate investment business fell less than our forecast. We raise our near-term revenue assumptions for its real estate investment business, which leads to 5.5%-6.1% higher earnings per share estimates for 2024-25. Our long-term forecasts are largely unchanged, and our fair value estimate of SGD 3.30 per share remains the same. We think the units are currently undervalued and believe that weaknesses in its China portfolio have been priced in. Given the start of the interest rate cut cycle, we expect the operating environment for the group’s fund management business to improve and drive medium-term earnings growth.