Following the privatisation of the property development arm of CapitaLand Group, CapitaLand Investment Limited (“CLI”) was subsequently listed on the Singapore Exchange on 20 September 2021. CLI is mainly engaged in the real estate investment business, and the Group priced a 5-year senior unsecured bond at a final price guidance (“FPG”) of 3.330% last week.
2021 was a milestone year for CapitaLand Group, as the management decided to separate its property development arm from its fund management and property investment business, and subsequently relist on the Singapore Exchange as CapitaLand Investment Limited (SGX: 9CI). The principal activities of CLI include fund management, lodging management and capital management with core markets spread across countries like Singapore, China and India. As at 31 December 2021, CLI managed approximately SGD 86b of funds under management (“FUM”) mainly through its 6 listed REITs and business trusts as well as private funds across the world. CLI is majority owned by Temasek Holdings as of February 2022, with a shareholding of 52.0%.
Proceeds from this bond offering will be used to refinance existing borrowings, finance the investments and general corporate purposes of the issuer and the guarantor. Both the issuer and new issue are expected to be unrated. The senior unsecured bond is expected to mature on 12 April 2027, and it may be redeemed early at par for taxation reasons.
For FY2021, revenue of CLI improved 16% year-on-year (“YoY”) from SGD 1.98b to SGD 2.29b, with higher contributions from both its Fee Income-Related Business (“FRB”) and Real Estate Investment Business (“REIB”). The Group also became profit-making in 2021 after incurring a loss in the previous year. Total profit for the year was SGD 1.56b, which is a substantial turnaround from a loss of SGD 0.67b in 2020. CLI managed to achieve a record asset recycling of SGD 13.6b in FY2021 and recognized portfolio gains of ~SGD 0.7b at the EBITDA level due to divestments of their properties in Japan, Singapore and China.
In terms of its credit profile, CLI has a strong liquidity position with SGD 3.9b in cash and cash equivalents and SGD 4.4b in available undrawn bank facilities, which is more than sufficient to cover its short-term borrowings of ~SGD 2.5b. Net debt-to-EBITDA improved from 8.9x in 2020 to 4.7x as at 31 December 2021, while net gearing ratio also improved to 0.48x as compared to 0.62x from a year ago. Interest servicing ability remains healthy with an interest cover ratio of 6.3x for last year (2020: 4.0x) due to a better operating environment during the year. CLI’s debt maturity profile is evenly spread out with an average debt maturity of 2.8 years, and the Group will look to continue extending its debt maturity profile where possible.
As for relative valuation, we think that the new issue is fairly priced with a FPG of 3.330% (YTM ~3.29%), given that the CAPLSP 3.080% 19Oct2027 Corp (SGD) is currently yielding around 3.28% with comparable remaining years to maturity. The new issue tightened 27 basis points from its initial price guidance of 3.600% with an order book of over SGD 780m. However, we should note CLI has a better credit profile following the split from its property development arm. For 2020, CapitaLand Limited has a net gearing of 0.68x (CLI: 0.62x as at 31 December 2020), while CapitaLand Limited interest cover ratio was only at 0.7x as compared to CLI at 4.0x. As such, investors who are looking for stable income options may consider the CLIVSG 3.330% 12Apr2027 Corp (SGD).
Declaration: For or specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) and the analyst who produced this report hold a NIL position in the abovementioned securities.
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