It intends to use the net proceeds to refinance existing borrowings

 

CAPITALAND Investment (CLI) has raised one billion yuan (S$186 million) from the second and final tranche of its sustainability-linked bonds in China, after amassing the same amount from an earlier tranche in March this year.

 

It brings the total amount raised by CLI&rsquo s sustainability-linked bonds in China to two billion yuan, or S$372 million.

 

The latest issuance was made at a fixed coupon rate of 2.8 per cent per annum, which CLI said was a &ldquo record low&rdquo among panda bonds &ndash or bonds issued and sold in China by a foreign issuer &ndash with a three-year tenor issued under a private placement.

 

This will contribute to lowering CLI&rsquo s financing costs, said the asset manager on Monday (Jul 15).

 

The second tranche of the bonds attracted &ldquo strong interest&rdquo from institutional investors with an order book that was 2.64 times subscribed, it said.

 

Puah Tze Shyang, chief executive of CLI (China), said: &ldquo Demand for our inaugural panda bond continues to be strong, affirming investors&rsquo confidence in CLI&rsquo s long-term competitiveness and strong execution capabilities. The successful issuance has deepened our access to domestic funding in line with our China for China strategy.&rdquo

 

He added: &ldquo It also dovetails CLI&rsquo s capital sources with its sustainability goals as we continue to seek responsible growth. Tapping lower-cost renminbi capital will help to mitigate foreign exchange fluctuations and further demonstrates our disciplined capital management.&rdquo

 

The first tranche of CLI&rsquo s sustainability-linked bonds issued in China was made with a fixed coupon rate of 3.5 per cent per annum.

 

Both tranches of the bonds have a three-year tenor.

 

CLI intends to use net proceeds from these bonds to refinance its existing borrowings.

 

REAL estate group CapitaLand Investment : 9CI +0.38% (CLI) was an active buyer of its stock in the past week. From Jun 21 to 28, the company bought back 2.5 million shares over four transactions. Its purchase price ranged from S$2.64 to S$2.65, and total buyback spend was S$6.6 million.

 

ShareInvestor data also shows CLI has spent the most on buybacks this year, among Singapore-listed counters. It has purchased 100.5 million shares over 43 transactions, and spent a total of S$273.7 million.

 

OCBC : O39 -0.55%, which is in second place on the buyback table, has spent S$147.6 million over 30 transactions.

 

CLI&rsquo s rate of buybacks is high relative to its recent history. Last year, CLI bought back 21.4 million shares over nine transactions, spending S$64.4 million. In 2002, the company bought back 6.9 million shares over two transactions, spending S$26.7 million.

 

The company was listed in its present form in September 2021 following a restructuring designed to unlock value.

 

Prior to this restructuring, the listed entity then known as CapitaLand included a property development arm. It had also been trading at a discount to its book value.

 

To address this undervaluation, CapitaLand separated its property development business from its asset management and lodging businesses.

 

The latter businesses were listed as CLI &ndash an asset-light entity that would grow its revenue from funds under management and fee-related earnings.

 

On its first day of trading, CLI&rsquo s shares closed at S$2.95 &ndash above the company&rsquo s pro forma net asset value of S$2.823. It rose as high as S$4.16 in April 2022.

 

Since the start of 2023, however, CLI&rsquo s shares have been steadily declining. They are down 14.7 per cent this year, closing at S$2.66 on Friday (Jun 28) &ndash or 97 per cent of its book value of S$2.74 as at Dec 31, 2023.

 

In a response to questions from shareholders ahead of its annual general meeting in April, CLI said increased finance costs and a slowdown in dealmaking activities have strained its operational performance.

 

China&rsquo s weak operating environment has also led to fair value losses and impairments on some parts of its portfolio.

 

It added, however, that it had managed to secure S$3.5 billion in commitments through its private fundraising activities last year &ndash a 42 per cent increase from 2022 &ndash and that the proportion of its operating profit contributed by fee-related business had increased to 54 per cent in 2023 from 40 per cent in 2021.

 

Several brokerages continue to rate CLI a &ldquo buy&rdquo , although at least one has recently cut its price target.

 

Maybank analyst Krishna Guha, in an April report, trimmed his target price to S$3 from S$3.15. Guha reduced his estimate for CLI&rsquo s earnings before interest, taxes, depreciation and amortisation by 14 per cent.

 

This was on a lower assumption for assets under management, and slower growth in CLI&rsquo s lodging business.

 

Heliconia signals confidence in CSE

Heliconia Holdings&rsquo stake in systems integrator CSE Global : 544 +1.27% has risen to 23.04 per cent, from 22.64 per cent previously, following an issue of new shares under CSE&rsquo s scrip dividend scheme.

 

For its FY2023, CSE had declared a final dividend of S$0.015 per share. Shareholders could opt to receive this in either cash or shares. Those who chose to receive shares would be issued new shares at an issue price of S$0.375.

 

On Jun 24, CSE announced it had issued 14.9 million shares as part of the scrip dividend scheme. The participation rate was 54.79 per cent, and the company&rsquo s share base increased by 2.19 per cent. Heliconia&rsquo s units received 6.1 million of the total number of new shares issued.

 

Heliconia, an investment company owned by Temasek, emerged as a substantial shareholder of CSE in July 2020 following a married deal with Serba Dinamik.

 

The latter, a Malaysian company providing engineering services to the oil and gas (O& G) industry, had acquired its stake in CSE in 2018.

 

CSE is best known as a provider of control systems, telecommunication networks and security solutions to O& G companies.

 

The company has, however, diversified into several trending sectors. Its offerings now include data centre electrification, the integration of electric vehicle charging stations with power grids and the manufacture of solar solutions.

 

Last year, the company&rsquo s revenue increased 30 per cent to S$725.1 million. Its net profit came in at S$22.5 million, up from S$4.8 million in 2022. Net cash generated from operations increased substantially &ndash from S$9.1 million to S$72 million.

 

In the first quarter of the year, CSE continued to build on that growth. Revenue increased 23.9 per cent to S$197.5 million

 

Maybank analyst Jarick Seet &ndash who rates CSE a &ldquo buy&rdquo with a 12-month price target of S$0.64 &ndash sees CSE as a proxy for the electrification, artificial intelligence and data centre investment themes.

 

He expects revenue growth in subsequent quarters to be higher as Q1 is typically CSE&rsquo s weakest quarter.

 

In a May report, Seet also noted that CSE recently installed a power management system for a data centre in the United States. Seet believes this system is for a major cloud provider and that the company &ldquo will likely win more data centre contracts from existing and new customers&rdquo .

 

Investors have shown little excitement about CSE&rsquo s prospects, however. The stock is down 9.1 per cent this year, closing Friday at S$0.40.

 

At the company&rsquo s recent annual general meeting, one shareholder expressed concern about the company&rsquo s debt levels. Its net debt stood at 76 per cent of equity as at end-2023.

 

The scrip dividend scheme may help address that further. Over the last three years, CSE&rsquo s dividend level has been unchanged even as its revenue and profits varied: It has paid an interim dividend of S$0.0125 per share and a final dividend of S$0.015 per share.

 

The company has only just introduced the scheme. The rationale is to retain cash for expansion, strengthen its working capital position and enhance its financial flexibility.

What has stood out for the CEO in the property industry this year is that there is a more discerning market

IS RESIDENTIAL property development in Singapore worth going into? What are the risks and rewards of the Jurong Lake District master developer site? How do prospects look for Singapore&rsquo s office and retail sectors? CapitaLand Development CEO Jonathan Yap share his thoughts with BT senior correspondent Leslie Yee in the latest episode of PropertyBT, a podcast series by The Business Times. Here are excerpts from the podcast.

 

Leslie Yee: What has surprised you in the Singapore property market thus far this year? And how will the next six to 12 months play out? What is your appetite for housing sites?

 

Jonathan Yap: Rather than say surprised, what stood out for me is that we can actually see a more discerning market. En bloc sales have slowed down. We saw transactions that did not happen. We also see more transactions happening as far as government land sales (GLS) are concerned, partially because the supply of GLS sites has increased. We saw sites which got very few bids &ndash in fact, in some cases, only one bid &ndash and for the first time in more than 10 years, we actually had tenders ending up with no award.

 

And in terms of pricing, we start to see pricing either at the lower end of market price expectation, or even below market price expectation. So that again is pointing in the same direction. What we actually see now, is (that)&hellip rather than increase in population, what is driving demand is probably change in lifestyle.

 

That said, the choices that buyers make today are going to be a lot more specific, more personal &ndash not just (depending on) pricing, but also perhaps the location. That&rsquo s where the selection of site, as well as the design and execution of the housing projects, become more important. But we&rsquo re still very active and optimistic on the market.

 

LY: You referred to the fact that participation in land tenders has been relatively weak, but developers like yourselves have taken on new housing sites. This is in spite of high interest rates, high construction costs, uncertain housing demand. All these factors &ndash do they worry you?

 

JY: Of course. I mean, we are a commercial entity. Of course, we look at the bottom line. It concerns us because ultimately, all investments that we make come with a certain risk. So that&rsquo s why it&rsquo s about how do we price in those risks? If interest cost is high, we just have to make sure that &ndash in our underwriting &ndash we price in interest costs.

 

Likewise, for commercial or retail property, we have to price in perhaps the catchment, the buying patterns and purchasing power of the location.

 

LY: Your group is also very active in the office and retail property segments in Singapore. What are the prospects and challenges for the office and retail property segments in Singapore?

 

JY: Work from home does change how office is in demand. I think the office is no longer the conventional place where you just work there. It&rsquo s really a place where people collaborate. So while it is true that we have seen some tenants give up space, we also see some tenants increasing their requirement.

 

The market has started to become a two-tier market. There will be a group of the market that&rsquo s still performing well. These are effectively well-located, well-specified office space. And the occupancy that we see there is still very high. On the other hand, we also start to see some older buildings &ndash perhaps not as appropriately located &ndash where we see vacancy creeping up.

 

In terms of retail space, I do think suburban and perhaps central retail spaces behave a little bit differently.

 

Obviously, suburban (malls) had the benefit, during Covid, of people working from home. People were, during the daytime, in a mall when previously they might not have the opportunity to do that. But now, more people are starting to return to the office. In fact, as you drive on the road, you can see that these days, the road is packed &ndash that is to me a signalling of people going back to office.

 

For Orchard Road or central area retail, it&rsquo s a little bit different. I would say increasing tourism obviously helps. It does bring people there.

 

One strong argument for both office as well as retail is the new supply of land. It&rsquo s relatively more controlled, compared to, say, residential. So that gives a certain underpinning as far as your demand and supply is concerned. Just like how we mentioned that residential buyers are becoming more discerning, I think similarly, office and retail tenants &ndash because of underlying demand &ndash are also becoming more discerning.

 

LY: Let&rsquo s now talk a bit about your mega bet on the Jurong Lake District Master Developer site. The consortium of CapitaLand Development, City Developments, Frasers Property, Mitsubishi Estate and Mitsui Fudosan was the only party to have put up their hands to take on this site. This project will have a long gestation period. What is the risk and reward for the Jurong Lake District Master Developer site? Will Jurong work as a key office destination with rents that match the CBD?

 

JY: Clearly, it is a new location. It&rsquo s an area where demand is not well established. Decentralisation is not a new concept. Clearly, the planning authority does want to push decentralisation for distribution of traffic and a whole host of other considerations. But you&rsquo re absolutely right &ndash it will be a long gestation project. It&rsquo s not a conventional government land sale site, where typically you just go plot by plot, then you price or underwrite based on an individual plot.

 

So, therefore. the risk we have to take is higher. But on the flip side, the opportunity is also more interesting &ndash because now it&rsquo s not plot by plot. You have a whole six-and-a-half hectares of space. Now, we can decide how to plan the different uses within the project in a more seamless manner.

 

Indeed, it&rsquo s a new way of approaching urban planning in Singapore, and that&rsquo s something we&rsquo re very excited to work with the planning authority to execute. That&rsquo s assuming if we&rsquo re awarded the site.

 

The reason why we actually have five of us coming together is absolutely for the same reason you articulated earlier &ndash because there are obviously risks that we need to underwrite.

 

But it&rsquo s fair to say, we are excited about the opportunity &ndash so much so that we submitted two proposals with a slightly different approach and scheme.

 

LY: What kind of office tenants do you think will be attracted to the Jurong Lake District site, and do you think that the rental there will be&hellip on a par with CBD, 20 per cent less? What kind of numbers are you looking at? You&rsquo re optimistic about this project, but do you see it giving returns on par with, say, a traditional residential project?

 

JY: Let&rsquo s go piece by piece... So you have the leasing piece, which is your office and your retail, as well as your residential-for-sale piece. As far as the leasing piece is concerned, clearly it has to charge a rental that&rsquo s lower than CBD.

 

We mentioned a little bit about the two-tier markets, especially with tenants today focusing more and more on sustainability.

 

The question would then be: Will there be enough stock within CBD that potentially can meet the sustainability as well as the new space requirement that users today expect? So as a result, we do see that there will be a group of customers or tenants that will want, as office tenants, to be in office space that meets that new level of space requirement.

 

But at the same time, they may not need to be in CBD. Therefore, they can afford to be somewhere else &ndash perhaps at a rental that&rsquo s lower than CBD, and perhaps potentially less congested than CBD as well.

 

In terms of retail and say, serviced residences, the other supporting amenities will be largely driven by how well we can bring the residential crowd, as well as office tenants in there.

 

If you&rsquo re able to bring these there, then they&rsquo ll have a group of people that they can support and therefore make a business out of it.

 

As far as residential is concerned, we have tested Jurong &ndash we launched J&rsquo Den last year. I would say we are very pleased and very thankful for the strong response buyers gave to the project.

 

And we do think over time, if we launch residential in a sensible manner, that is something that will be helpful as far as underwriting is concerned.

 

LY: There must be tons of issues that give you grey hair. Trends such as deglobalisation can be extremely worrying. Jonathan, which &ndash among high interest rates, climate change, rise of artificial intelligence and geopolitics &ndash worries you most, and why?

 

JY: I think all those you have mentioned obviously are areas that we need to pay attention to. I mean, the interest rate is obvious... Clearly, it&rsquo s high. It means that we have to price in the high interest costs. Not just in terms of when we execute, but also in terms of the returns that we expect.

 

You mentioned political tension, but that&rsquo s a harder one to price. We can hedge interest costs, but you can&rsquo t do likewise for political risk.

 

But that&rsquo s where we then need to make a judgment. That&rsquo s why we choose few markets, but we want to go very, very deep in those markets in executing our development investment. Because clearly as a developer we do need to go very hands-on to ensure that we have right people on the ground, to be able to not only deal with the day-to-day but help us to read the market.

This comes amid the company&rsquo s efforts to drive for sustainability and cost efficiency 

 

CAPITALAND Investment (CLI) will adopt cooling-as-a-service (Caas) systems in Raffles City Singapore, Plaza Singapura and The Atrium@Orchard, the global real asset manager announced on Tuesday (Jun 18). 

 

This comes amid the company&rsquo s efforts to drive for sustainability and cost efficiency. 

 

The cooling systems across the three flagship properties will cover 4.8 million square feet (sq ft) of gross floor area (GFA) with a combined installed capacity of 15,000 refrigerant tonnes. The properties are currently owned by CapitaLand Integrated Commercial Trust and managed by CLI. 

 

The Caas contracts, which were awarded to Keppel DHCS and Engie South East Asia, are expected to reduce energy consumption by over 30 per cent across the properties, compared to total energy consumption in 2023.

 

The systems will also save at least 118,680 tonnes of carbon emissions over the 15-year operating period. 

 

The company said that the contracts will be paid for on a utilisation basis and is expected to save enough energy to power more than 4,800 four-room HDB flats in a year, based on average household electricity consumption.

 

Under the 15-year performance guaranteed contracts, Keppel DHCS and Engie will implement Caas to provide chilled water and air-conditioning to these flagship developments.

 

They are fully responsible for the design, build, operations, maintenance, repairs and upgrades to the cooling system, which will use a supply-and-service subscription throughout the contract period. 

 

It also noted that Raffles City Singapore, with a GFA of over 3.45 million sq ft, will be Singapore&rsquo s largest integrated development to adopt Caas to date. 

 

&ldquo The Caas solution is predicted to reduce a total of more than 76,000 tonnes of CO2, the equivalent of taking over 16,000 cars off the roads for a year,&rdquo said Lim Yong Wei, executive director of Keppel DHCS&rsquo s executive director for its energy-as-a-service infrastructure division. 

 

CLI expects improved energy efficiency to help upgrade the green certification, which is conferred by the Building and Construction Authority, across its three properties. It aims to improve the rating of The Atrium@Orchard to Green Mark Platinum (Super Low Energy) from Green Mark Gold. Similarly, Raffles City Singapore and Plaza Singapura are expected to boost their respective ratings to Green Mark Platinum. 

 

&ldquo The Caas contracts at Raffles City Singapore, Plaza Singapura and The Atrium@Orchard optimise the energy performance of our properties and reduce our carbon footprint,&rdquo said Chris Chong, CLI&rsquo s chief executive officer of retail and workspace in Singapore and Malaysia.

 

INSTITUTIONS were net sellers of Singapore stocks in the five trading sessions up to Jun 13, with S$3.6 million of net institutional outflow, as 23 primary-listed companies conducted buybacks with a total consideration of S$88.8 million.

 

CapitaLand Investment : 9CI -0.38%(CLI) led the buyback consideration tally, purchasing close to 20 million shares at an average price of S$2.62 per share. Since Apr 25, CLI has bought back 1.2 per cent of the company&rsquo s issued shares (excluding treasury shares).

 

Leading the net institutional outflow over the five sessions were Yangzijiang Shipbuilding Holdings : BS6 0%, Singapore Airlines : C6L -0.59%, CapitaLand Ascendas Reit : A17U -0.77%, CapitaLand Integrated Commercial Trust : C38U -0.51%, Keppel : BN4 -1.51%, City Developments : C09 -1.12%, Genting Singapore : G13 -0.57%, Centurion Corp : OU8 +0.89%, ComfortDelGro Corp : C52 +1.49% and Golden Agri-Resources : E5H 0%.

 

Singtel : Z74 -0.39%, DBS : D05 -1%, UOB : U11 -0.71%, Seatrium : 5E2 -1.76%, Jardine Cycle & Carriage : C07 +1.04%, CLI, Great Eastern Holdings : G07 -0.27%, Sats : S58 +0.34%, Singapore Exchange : S68 -0.94% and Frasers Logistics & Commercial Trust : BUOU -1.04% led the net institutional inflow over the five sessions.

 

This brought the net institutional inflow in the second quarter of 2024 up to Jun 13 to S$264.5 million.

 

In the five trading sessions, 90 director interests and substantial shareholdings filed for close to 40 primary-listed stocks. Directors or chief executive officers filed 20 acquisitions and no disposals, while substantial shareholders filed six acquisitions and three disposals.