UOB Kay Hian (UOBKH) cut its target price for CapitaLand Investment : 9CI +1.36% (CLI) to S$3.90 from S$4.25, after CLI posted weaker-than-expected Q3 results in a business update on Thursday (Nov 9).

 

The trimmed target price was a result of CLI&rsquo s potential fair value loss and earnings downgrade, said UOBKH analyst Adrian Loh in a report on Friday.

 

Loh quoted CLI&rsquo s management on the highly likely fair value losses for 2023, given that CLI&rsquo s comparable companies are experiencing declines in enterprise values (EV), leading to lower ratios between EV and earnings before interest, taxes, depreciation and amortisation (Ebitda).

 

&ldquo We highlight that Frasers Property issued a profit warning in October 2023 related to its property in UK and Europe, and with valuers taking guidance from each other, CLI warned that its properties in China, Australia, US and Europe could be affected.&rdquo

 

Loh also lowered earnings estimates for FY2023 to FY2025 by 7 per cent to 14 per cent to factor in higher interest costs in 2023 and 2024, lower Ebitda margins and revenue growth for the fund management business, as well as a slower recovery of its China properties.

 

The target price cut came with a maintained &ldquo buy&rdquo call, as Loh highlighted that CLI&rsquo s closing price on Thursday at S$3.03 was &ldquo inexpensive&rdquo at a one time multiple to FY2024 book value estimate, especially compared with its peak price-to-book ratio of 1.4 times for 2022.

 

&ldquo In the longer term, CLI&rsquo s slight pivot away towards South-east Asia and India with its inaugural wellness and healthcare fund should provide an interesting avenue of growth.&rdquo

 

Loh noted that CLI is shifting focus beyond its core countries of Singapore and China, and has partnered with Thailand&rsquo s Pruksa for a new fund to tap into the region&rsquo s wellness and healthcare sector, with an initial close of S$350 million.

 

&ldquo The company struck a brighter note in India where it is seeing a lot of investor interest, strong leasing momentum and positive rental reversions overall,&rdquo added Loh, noting that CLI remains cautious on China and predicts negative rental reversions in its retail sector.

 

All 148 units of the one-bedroom, one-bedroom with study and two-bedroom types in J' den have been sold, says CLD. 

MIXED-USE development J&rsquo den sold 88 per cent of its 368 residential units on launch day at an average price of S$2,451 per square foot (psf), said CapitaLand Development (CLD) on Sunday (Nov 12).

 

All unit types in the development were well-received on launch day, with the one- and two-bedroom units being the most popular, said CLD. All 148 units of the one-bedroom, one-bedroom with study and two-bedroom types were sold. There was also &ldquo strong&rdquo take-up for the development&rsquo s larger three- and four-bedroom units by owner-occupiers, the group added.

 

Unit sizes range from 527 square feet (sq ft) for a one-bedroom unit to 1,485 sq ft for a four-bedroom unit.

 

J&rsquo den is a 99-year leasehold project comprising a 38-storey residential tower above a two-storey commercial podium. It is being redeveloped from the former JCube shopping mall in Jurong East the site was acquired by CLD for S$340 million in January 2022.

 

CLD said that more than 99 per cent of the homebuyers are Singapore citizens and permanent residents, with close to 60 per cent aged 40 or below. About 62 per cent of the homebuyers currently reside in the western region of Singapore, it pointed out.

 

Ismail Gafoor, CEO of PropNex, noted that J&rsquo den&rsquo s sales performance on launch day has made it the best-selling project this year. &ldquo This is one of the most highly anticipated projects this year, as it is situated in a key landmark precinct in Singapore, the Jurong Lake District (JLD), which has been envisioned as the largest mixed-use business district outside the city centre,&rdquo he explained.

 

Gafoor said that although J&rsquo den has set a new benchmark launch price for that locale, many buyers &ldquo are comfortable and confident&rdquo to enter the market to purchase units. &ldquo That is because they deem it as compelling given the project&rsquo s location attributes today, and also considering the potential upside in the future when the JLD is fully realised.&rdquo

 

Huttons Asia CEO Mark Yip attributed J&rsquo den&rsquo s brisk sales to &ldquo pent-up demand and the desire from buyers to stay in the heart of JLD&rdquo . The development has attracted a &ldquo good mix&rdquo of investors and owner occupiers, he observed, with buyers drawn to J&rsquo den&rsquo s convenience as it is directly connected to Jurong East MRT interchange station.

 

Investors would also be attracted to J&rsquo den, said PropNex&rsquo s Gafoor, as they anticipate the JLD to boost residential leasing demand when more businesses are set up in the precinct in the future.

 

Nicholas Mak, chief research officer of property portal Mogul.sg, noted that new residential projects within comfortable walking distance to Jurong East MRT interchange station are &ldquo few and far in between&rdquo . The last residential project launched in the Jurong East town centre was J Gateway in June 2013, he added.

 

As there is &ldquo very limited&rdquo vacant land for future private residential developments around the Jurong East town centre, this could have contributed to J&rsquo den&rsquo s stronger sales performance, Mak said.

 

Analysts also compared J&rsquo den&rsquo s performance with the residential launch of Hillock Green at Lentor Central, which sold 27 per cent of its 474 units over the same launch weekend.

 

Gafoor said that pent-up demand for Hillock Green was &ldquo less intense&rdquo than that for J&rsquo den, given the ample stock of new homes in the Lentor area in the wake of recent launches.

 

He added: &ldquo However, we think a take-up rate of more than 27 per cent (for Hillock Green) is a positive start, and we believe some buyers may need more time to compare between new launches in the mass market before making a purchase.&rdquo

 

REAL estate investment manager CapitaLand Investment : 9CI -0.33% (CLI) posted a 3 per cent drop in revenue to S$2.1 billion for the nine months ended Sep 30, compared with S$2.2 billion in the corresponding period the previous year.

 

The dip in revenue was due to an 8 per cent decline in revenue of its real estate business to S$1.4 billion, dragged by a faltering China market, but partially offset by a 9 per cent growth in its fee income-related business to S$799 million, said the manager in a business update on Thursday (Nov 9).

 

Still, 64 per cent of the nine-month revenue came from its real estate investment business. Total assets as at end-September stood at S$34.3 billion, down from S$36.4 billion the previous year.

 

Its net asset value dropped around 5 per cent to S$14.4 billion, while the manager highlighted that over 50 assets &ndash worth around S$10 billion &ndash are in the divestment pipeline.

 

The manager also noted that softening economic activities in China have been weighing on its real estate performance, as the S$10.6 billion in China assets occupy the most of its portfolio at 31 per cent.

 

Growth driver

Its growth driver is an asset-light fee-based business, which comprises private funds, listed funds, lodging and commercial management. This segment registered the strongest revenue growth in lodging management, with a 31 per cent year-on-year increase.

 

This was mainly led by stronger operating performance and higher contribution from serviced apartment provider Oakwood, which was acquired in July 2022.

 

The property giant also recorded growth in revenue per available unit (RevPAU) across various markets, driven by higher occupancy and room rates.

 

Overall RevPAU improved by 25 per cent, while the occupancy rate increased nine percentage points and average daily rates grew 8 per cent.

 

&ldquo North Asia continued as the region displaying the fastest growth in RevPAU, driven by Japan,&rdquo said the manager, noting that RevPAU for the region, excluding China, rose 110 per cent on the year.

 

China market&rsquo s occupancy rate improved by 12 percentage points year on year on recovering tourism, boosting RevPAU by 16 per cent.

 

The manager highlighted that Singapore market&rsquo s RevPAU recovered to 130 per cent of pre-Covid levels, while RevPAU of the European market was restored to 117 per cent of pre-Covid levels.

 

Healthy debt headroom

The manager also noted a healthy debt headroom, with its net debt-to-equity ratio at 0.55 times and average debt maturity at 2.9 years.

 

The interest coverage ratio of the debt profile stood at 3.7 times, with an implied interest cost at 3.9 per cent and 64 per cent debt on fixed rates.

 

Since the start of Q3 and until Nov 8, CLI has made S$1.1 billion worth of divestments, with the majority of the proceeds going into its private and listed funds.

 

Under CLI&rsquo s fund management segment, while recurring fees increased 9 per cent on the year for the three quarters, fee-related earnings decreased 10 per cent. This was due to an absence of event-driven private funds performance fees, which registered S$38 million in the same period the prior year.

 

Five funds were launched, and the total funds under management stood at S$29 billion in the nine months.

 

As at Nov 8, the total equity raised through funds was S$3.5 billion, including CLI&rsquo s equity contribution. Total investments of S$1.5 billion and divestments of S$167 million were made under CLI&rsquo s funds.

 

CAPITALAND Development (CLD) will start previews for its J&rsquo den mixed-use development on Saturday (Oct 28), with prices starting at S$2,100 per square foot (psf).

 

The 99-year leasehold project is a redevelopment of the former JCube, a leisure and edutainment mall in Jurong East. It was acquired by CLD for S$340 million in January 2022.

 

Market watchers then expected final selling prices of the new development&rsquo s residential units to range between S$2,000 and S$2,100 psf.

 

J&rsquo den occupies a site area of 83,648.5 square feet (sq ft) and comprises 368 units in a 38-storey tower, built atop a two-storey commercial podium. Nearly 70 per cent of it &ndash or 257 units &ndash will have two to three bedrooms.

 

Units are sized between 527 sq ft for a one-bedder and 1,485 sq ft for a four bedder. Three-bedroom units with a study and four-bedroom units will be served by private lifts for added exclusivity, said CLD. 

 

The real estate developer noted that J&rsquo den will be the first condominium launched in the Jurong Gateway area in a decade. The last was MCL Land&rsquo s J Gateway in 2013. 

 

Caveats data showed that resale prices at J Gateway averaged at S$954,500 in the past three months. In late September, a 484 sq ft unit was transacted at slightly over S$1 million or S$2,126 psf. 

 

Resale prices for private condo units in J&rsquo den&rsquo s vicinity have also ranged from S$918,000 to S$1.8 million in the past three months. The most recent sale just two weeks ago was for a 1,163 sq ft unit at 99-year leasehold condo The Mayfair, which transacted at S$1.3 million or S$1,101 psf. 

 

Tan Yew Chin, chief executive officer of CLD (Singapore), noted that J&rsquo den is also within Jurong Lake District, which is quickly transforming into a &ldquo vibrant business and leisure hub amidst a unique lake setting under the government&rsquo s master plan&rdquo .

 

Said Tan: &ldquo With its excellent locational and product attributes, we are confident that J&rsquo den will attract astute buyers who wish to enjoy the privileges of living in the heart of one of Singapore&rsquo s most coveted districts, where facilities for retail, entertainment, healthcare, education, wellness and fitness are all within easy reach.&rdquo  

 

J&rsquo den will book sales from Nov 11, and is expected to receive its notice of vacant possession in November 2028

 

Institutions are net sellers of Singapore stocks over the five trading sessions through to Oct 19, with S$158 million of net institutional outflow. 

 

INSTITUTIONS were net sellers of Singapore stocks over the five trading sessions through to Oct 19, with S$158 million of net institutional outflow, as 21 primary-listed companies conducted buybacks with a total consideration of S$11.7 million.

 

CapitaLand Investment : 9CI +0.66% led the share buyback consideration tally, buying back 1,605,600 shares at an average price of S$3.02 per share, followed by Venture Corporation : V03 -0.86% which bought back 275,000 shares at an average price of S$11.97 per share. Yangzijiang Financial Holding : YF8 +3.03% also bought back 5,496,400 shares at an average price of S$0.35 per share.

 

Leading the net institutional outflow over the five sessions were UOB : U11 -0.43%, Keppel Corporation : BN4 +1.28%, DBS : D05 -0.27%, CapitaLand Ascendas Reit : A17U -2.75%, Keppel DC Reit : AJBU -3.37%, Singapore Airlines : C6L -1.32%, Seatrium : S51 0%, Jardine Cycle & Carriage : C07 -1.32%, Mapletree Logistics Trust : M44U -2.63%, and Jardine Matheson Holdings : J36 -1.08%.

 

Meanwhile, OCBC : O39 -0.31%, Yangzijiang Shipbuilding : BS6 -1.38%, Genting Singapore : G13 +0.6%, Cortina Holdings : C41 0%, ComfortDelGro Corporation : C52 0%, UMS Holdings : 558 -7.69%, Thai Beverage : Y92 0%, Singapore Exchange : S68 -0.62%, Singapore Technologies Engineering : S63 0%, and Mapletree Industrial Trust : ME8U -1.38% led the net institutional inflow during the period.

 

The five trading sessions saw fewer than 50 changes to director interests and substantial shareholdings filed for 20 primary-listed stocks. They included 10 company director acquisitions with three disposals filed, while substantial shareholders filed seven acquisitions and four disposals.

As chief sustainability officer (CSO) of CapitaLand Investment (CLI), one would think Vinamra Srivastava would readily pick the planet over profit. After all, CLI aims to cut absolute Scope 1 and 2 carbon emissions by 46% by 2030 and achieve net zero by 2050. To see this to fruition, would CLI be willing to sacrifice shareholder returns to achieve its net-zero targets?

 

The reality is much more nuanced, says Srivastava after a long pause. &ldquo To love your son more or your daughter more? For me, it&rsquo s like that. CLI is at a stage where we are very clear that sustainability leadership and business feasibility must go hand-in-hand. It is not an either-or question for us.&rdquo

 

Srivastava likens the question to a zero-sum game between key stakeholders. &ldquo Which stakeholder is more important: customers or investors? How will the company answer this question? Both together will drive your business growth, right? So for us, the focus is how do you continue to balance both of these in a way that [lets] you keep moving forward with the right balance.&rdquo

 

Assuming the two ends of the spectrum are financial returns and sustainability leadership, there may be times when certain business decisions and contexts may sway to one side or the other, says Srivastava. &ldquo But on average, we will try our best to balance this out on a contextual basis without swinging to any extreme. [It&rsquo s] easier said than done.&rdquo

 

Maintaining this delicate equilibrium is the uphill task facing sustainability executives, says Srivastava, who took on the role in July 2022 after four years as CEO of CLI&rsquo s India business parks. &ldquo All CSOs must be able to make sense of all of this and make decisions. More often than not, you need to incorporate all these angles. [For] anything that you decide, there is always another angle that you need to check. You have to be very broad [and] at the same time very deep because the subject matter is so complex. I think that was the first sort of experience and realisation.&rdquo

 

Srivastava offers another word of advice to his peers: be agile and comfortable with change amid &ldquo structured chaos&rdquo . &ldquo Things are evolving so rapidly &mdash whether it&rsquo s about regulation or reporting standards, business viability or the start-up ecosystem, or even how to decarbonise &mdash investors&rsquo and customers&rsquo views [are] changing very rapidly. There are no set proceedings in this area what is considered a good decarbonisation roadmap versus one that doesn&rsquo t work? Nobody has done it in the past. So everybody&rsquo s figuring out, in their microcosm, how to do this well.&rdquo

 

See also: SGX RegCo to seek feedback by year-end on mandating ISSB-aligned climate reporting

 

Still, the dynamic landscape is not an excuse for not having the right strategy, adds Srivastava. As head of CLI&rsquo s corporate strategy between 2015 and early 2018, he believes in forming a sturdy overarching plan. &ldquo Things will evolve in five years, right? But you don&rsquo t keep changing the strategy every year. [However,] you may keep changing the nuts and bolts.&rdquo

 

&ldquo We&rsquo re at a stage where we don&rsquo t need buyin on why we should be doing this or convincing people on the need to address similar issues I think we&rsquo ve all already evolved there,&rdquo he says. &ldquo So the buy-in is about how we should approach it. What works for business unit X may not be suitable for business unit Y it&rsquo s that level of conversation.&rdquo

 

CLI&rsquo s refreshed master plan

 

On June 1, CLI elevated its sustainability targets to &ldquo keep pace with the evolving global landscape and to ensure relevance to its business&rdquo .

 

The &ldquo refreshed&rdquo 2030 Sustainability Master Plan (SMP) includes an increased target for renewable energy use from 35% to 45% by 2030 and a new target to reduce waste intensity in daily operations by 20%.

 

CLI&rsquo s targets were first launched in 2020. The update also introduces new social targets focused on social impact, human capital development and employee wellness, including having at least 40% female representation in senior management.

 

CLI also released its 14th sustainability report, which has been externally assured since 2010. In 2022, over $4.7 billion in sustainable finance was secured by CLI, its REITs and business trusts, taking the total to more than $11.6 billion since 2018. CLI says interest rate savings from its sustainability-linked loans have been channelled back into decarbonisation investments.

 

Compared to CLI&rsquo s chosen baseline year of 2019, absolute Scope 1 and 2 emissions in 2022 are 16.8% and 6.29% lower, respectively. Notwithstanding the targets, CLI&rsquo s absolute Scope 1 and 2 emissions grew 16.4% and 6.27% y-o-y, respectively, between 2021 and 2022.

 

According to Srivastava, creeping emissions figures throughout the Covid-19 years reflect an economic rebound across CLI&rsquo s properties. &ldquo Footfall is increasing people are returning to the office, and our lodging portfolio is vibrant. So all of that, of course, on a year-round basis means that our portfolio emissions slightly increased, which is not unexpected.&rdquo

 

Instead, he is focused on reducing emissions intensity, &ldquo at least in the short term&rdquo . By 2030, CLI aims to cut carbon emission and energy consumption intensity by 72% and 15%, respectively. &ldquo If you look at our emission intensity, both on a per square foot basis and on emissions per dollar of revenue, both are painting a different story.&rdquo

 

Taken together, Scope 1 and 2 emission intensity by gross floor area (GFA) increased from 39.7 to 40.7 kgCO2e/m2 between 2021 and 2022. Meanwhile, Scope 1 and 2 emissions intensity fell from 95 to 90 tonnes of carbon dioxide equivalent (tCO2e) per million dollars of revenue.

 

&ldquo Both of these show that while the business activity has grown, we are doing it more energy-efficiently,&rdquo says Srivastava, &ldquo and that is a principle we want to follow. Otherwise, as the business grows, emissions will grow. So by that logic, our business should not grow, which is another extreme.&rdquo

 

CLI wants 45% of its electricity consumption to come from renewable sources by 2030. This figure was around 5% last year. Srivastava breaks down the task ahead by country. &ldquo India already has huge ambitions for renewable energy and will be one of the leaders in generation capacity in this region&hellip One of our parks in India gets more than 90% of its power from renewables.&rdquo

 

The 45% is a global figure, he adds. &ldquo India has different targets, Singapore, China, Australia, and so on. These numbers are based on what we think today is possible regulatory-wise [and] commercially.&rdquo

 

CapitaLand also scours for technology via its CapitaLand Sustainability X Challenge (CSXC), which welcomes innovative solutions worldwide. The third iteration began in March, with over 680 innovations from 79 countries.

 

The 10 finalists will pitch to a panel of judges at CSXC 2023 Demo Day on Oct 26. They will vie for the opportunity to pilot their innovations and scale them at selected CapitaLand properties globally and be awarded up to $75,000 each.

 

Srivastava says he is not searching for a &ldquo silver bullet&rdquo among the hundreds of entries. &ldquo If there is a solution that I can only scale up in one geography and asset class and not in others, I&rsquo m absolutely fine with that. I would rather have 10 different solutions one may work great for business parks in India, one may do well for malls in Singapore, one for warehouses in China.&rdquo

 

Decarbonisation journeys must be contextualised to each property, he adds. &ldquo Companies that can do this well will make more impact on the ground than looking for one or two big solutions that can solve a problem. I wish that had happened I would be very happy. But until then, you&rsquo ve got to do the hard work, roll up your sleeves, and contextualise.&rdquo

 

Coming disclosures

 

Corporate sustainability reporting has seen two major developments in the four months since CLI&rsquo s updated SMP.

 

First, the International Sustainability Standards Board (ISSB) issued on June 26 its inaugural standards, which incorporate the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) from 2021 and aims to align sustainability-related disclosures in capital markets worldwide.

 

Second, the Taskforce on Nature-related Financial Disclosures (TNFD) released on Sept 18 its risk management and disclosure framework, which aims to enable organisations to report and act on nature-related risks.

 

Climate reporting is mandatory for Singapore-listed companies in the financial, energy, agriculture, food and forestry industries from FY2023. While there has been no word yet on mandatory nature-related disclosures among companies here, the Singapore Exchange S68 -0.3% Regulation (SGX RegCo) will likely announce ISSB adoption in 2024.

 

The bourse regulator said in September that it would consult on any possible changes to current listing rules by the end of the year.

 

Srivastava is confident CLI is ahead of the curve. &ldquo Our company is at the stage where our sustainability strategy is driven by our vision and execution, not because regulators are asking us to do it. Regulations are important to ensure we continue to disclose and report consistently and transparently, but the strategy is far beyond what the regulations require.&rdquo

 

As one of Singapore&rsquo s largest companies by market capitalisation, Srivastava says CLI will release a &ldquo standalone TCFD report&rdquo with climate scenario analysis. &ldquo We&rsquo ve already got the underlying building blocks we have been reporting. So for us, the ISSB integration is a good step forward because it allows us to consolidate all of that into one standard.&rdquo

 

Nature and carbon are &ldquo two sides of the same coin&rdquo , he adds. &ldquo It&rsquo s good to see that there is increasing focus on nature. Eventually, that has to happen. Companies are working hard to figure out the climate piece in practice and reality. I can&rsquo t say on behalf of the regulators, but as a private player in the market, I suppose there will be many lessons from how TCFD was rolled out, so adopting TNFD should be smoother because you don&rsquo t have to reinvent the wheel.&rdquo  

Then

 

CapitaLand Open End Real Estate Fund (COREF), the flagship regional core-plus fund of CapitaLand Investment (CLI) 9CI -1.24% , has acquired a newly completed, Grade A logistics property in South Korea for $112 million.

 

The acquisition will bring COREF&rsquo s funds under management (FUM) to over $1 billion.

 

The property, Anseong Seoungeun Logistics Centre, comprises two four-storey buildings with basement floors. The property has a total of 60,407 sqm of net leasable area.

 

It is located in the north western region of Anseong, an emerging logistics hub in the Gyeonggi province. The location is said to be well-served by primary expressways providing easy access to Seoul and Greater Seoul. A new expressway, which is expected to be completed by 2024, will add greater accessibility to the property.

 

&ldquo Leveraging our team&rsquo s deal sourcing and execution capabilities and extensive 20-year track record, we secured this high-quality asset at an attractive price through an off-market exercise,&rdquo says Matthew Sohn, head of Korea for CLI. &ldquo We expect logistics supply to moderate significantly in the midterm given rising construction costs, project financing challenges and tighter development restrictions. We see potential in this asset as it has a prime location in the north-western region of Anseong, an up-and-coming submarket that has attracted major logistics companies to set up base and several global investment firms to invest in logistics assets.&rdquo

 

&ldquo This investment complements COREF&rsquo s existing portfolio of 10 office and multifamily assets across Japan, Singapore and Australia and diversifies the portfolio to the resilient South Korean logistics sector,&rdquo adds Simon Treacy, CEO of private equity real estate at CLI. &ldquo Demand for quality logistics facilities in the country is robust and increasing steadily on the back of accelerating e-commerce growth that has resulted in the country having one of the highest ecommerce penetration rates globally. The transaction also aligns with COREF&rsquo s key investment themes, which include capitalising on emerging submarkets in the fund&rsquo s target developed countries and the growing dominance of e-commerce.&rdquo

 

&ldquo Asia Pacific continues to benefit from rapid urbanisation and robust economic growth. Since the launch of COREF, we have built a diversified portfolio of 11 quality assets across four countries in Asia Pacific that offer investors attractive risk-adjusted returns. We will continue to leverage our country teams&rsquo on-the-ground expertise to grow our private funds,&rdquo Treacy continues.

 

Since its inception in September 2021, COREF has invested in assets in Australia, Japan and Singapore.