Launch of New Funds and Growing AUM Are Key Drivers for CapitaLand Investment; Initiating Coverage

We are initiating coverage of CapitaLand Investment Limited, or CLI, with a fair value estimate of SGD 3.75 per share. CLI is a real estate investment management company with two main divisions in funds management and real estate investments. Post restructuring, the capital-heavy property development was privatized into CapitaLand Development, or CLD, and further transition to an asset-light model is expected to see the group share price re-rate, in line with international peers. This may take time though, as real estate investment income currently makes up 85% of operating income. In our view, the key positive driver is an acceleration of funds under management growth, particularly the launch of new funds investing in new economy property types in business parks, data centers and logistics. New economy property types, structured as private funds, attract higher management fees relative to traditional property types in malls and offices. For CLI, a large proportion of funds under management are listed REITs, comprising lower average base fees compared to private vehicles.