CapitaLand Investment Profit Drops on China, High Rates

CapitaLand Investment Ltd. posted a 19% drop in its first-half profit, due to lower portfolio gains amid higher interest rates, China’s slow recovery and a cautious dealmaking environment.

(Bloomberg) — CapitaLand Investment Ltd. posted a 19% drop in its first-half profit, due to lower portfolio gains amid higher interest rates, China’s slow recovery and a cautious dealmaking environment. 

Net income fell to S$351 million ($260 million) in the six months ended June 30 from S$433 million a year earlier, the Singapore-based real estate investment manager said in a statement Friday. Revenue dipped 0.7% to S$1.35 billion. 

Shares fell after the company posted a drop in revenue in its real estate investment business, partly due to a smaller contribution from properties in China, its biggest market outside of Singapore. Still, executives expressed optimism that the Chinese government will do more to support the economy and foreign investors will remain drawn to the market. 

“We remain cautiously optimistic that further policy relaxation support as well as trade and consumption-enhancing measures will be rolled out” in the second half, Puah Tze Shyang, chief executive officer of CapitaLand Investment’s China operation, said at a briefing. “We still have institutional investors with us that are long China.” 

Bloomberg Intelligence analysts said second-half growth at the firm may be supported by higher fees and more acquisitions by its funds, along with a gradual pickup in China, according to a note published before the results were released. 

Citigroup Inc. analyst Brandon Lee also expects a stronger second half, citing factors including an expected pickup in asset sales and an encouraging outlook for raising capital. 

CapitaLand Investment said separately that it recently secured a capital commitment of about S$1.3 billion from global institutional investors for three of its private funds. That brings its total equity raised to S$3.2 billion so far this year — a 28% increase from the whole of 2022.

“We expect the pace of capital recycling to improve,” said Chief Executive Officer Lee Chee Koon. “We will also intensify our efforts to raise domestic capital to support our China business, further diversify our portfolio and scale up our business globally.”

Shares Drop

Shares of CapitaLand Investment fell 1.9% at 11:54 a.m. in Singapore, taking this year’s decline to 13%. 

Fee income-related business revenue grew 9% on year, supported by stronger recurring fund management fees and higher earnings from lodging management, the results showed.

The company’s lodging unit is likely to continue to benefit from the region’s tourism rebound. While the company faces headwinds from rising interest rates and China’s slower-than-expected recovery, the outlook for global tourism sectors remain positive.

Read about rival City Developments’ results here 

The real estate investment manager has been acquiring data centers and business parks, joining a slew of private equity firms in the hunt for such infrastructure. 

CapitaLand Investment set up two new China-focused funds this year, and China CEO Puah said he was “quietly confident” in establishing more in the second half. 

The real estate company split its investment and development operations in 2021 — its biggest revamp in decades. The real estate development arm was privatized and is now owned by a unit of state-investment firm Temasek Holdings Pte.

(Updates with shares, China comments in the fourth paragraph, analyst comment in sixth)

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