Why CapitaLand’s fee income grew 30% in the first quarter

• CapitaLand Ltd (SGX: C31) share price falls to S$3.51 on Friday (14 May 2021)
• The real estate developer revealed that total fee income for 1Q 2021 rose 9% year-on-year
• Total transacted investments also closed in on S$3 billion for the quarter, led by Ascendas Reit’s S$905 million acquisition of 11 data centres in Europe in March
• Buy and sell CapitaLand stocks with an IG account

CapitaLand share price: What’s the update?

CapitaLand shares are down some 1.4% since it posted a business update for the first quarter of 2021.

The property group’s operational recovery across asset classes in the second half of 2020 continued into 1Q 2021, it shared on Wednesday (12 May 2021) morning.

Fee income for the quarter grew 30.5% year-on-year to S$99.8 million from S$76.5 million in 1Q 2020, thanks to ‘higher transactional activities due to improved market sentiments’.

Consequently, total fee income for the quarter picked up 9% year-on-year to S$203.6 million, mainly driven by an increase in real estate investment trust and private fund management fees corresponding to higher fund assets under management.

The blue-chip counter is up around 11% so far this year. Analyst sentiments published by SGX StockFacts show a consensus rating of ‘outperform’ alongside a 12-month target price of S$4.11 on the stock.

CapitaLand now in ‘gradual recovery’

‘CapitaLand’s first quarter trading performance demonstrated the group’s ongoing operating resilience, as we emerged from the Covid-19 pandemic into a gradual recovery,’ the company said.

Other highlights include total real estate transactions, which stood at an estimated S$2.75 billion year to date. The transacted investments include Ascendas Reit’s acquisition of 11 data centres in Europe for S$905 million in March 2021.

Of this investment sum, 95% had gone into new economy assets, including the recently announced S$758 million acquisition of a hyperscale data centre campus in Shanghai, China. New economy assets under management increased by roughly S$2.4 billion since 4Q 2020.

Data centre transactions made up almost S$1.7 billion of all investments.

In terms of financials, the group says its balance sheet remains strong, with S$14.8 billion of cash and available undrawn facilities.

‘This will continue to support our recovery and growth,’ CapitaLand noted.

The group also has a ‘healthy’ net debt-to-equity ratio of 0.65 times, which corresponds to nearly S$1.8 billion of implied debt headroom for potential liquidity needs and underwrite growth opportunities. This also equates to a debt maturity profile of roughly 3.5 years.

The real estate company had a fixed debt rate of 64%, a net debt/ total asset of 0.34 times, a net tangible assets per share of S$4.18 and net asset value per share of S$4.38 as of 31 March 2021.

Restructuring will not impact day-to-day business

The group also provided a recap of its 3.0 strategy, in which it proposed a strategic restructuring to consolidate its investment management platforms and lodging business into CapitaLand Investment Management on 22 March 2021.

‘Following the initial announcement, we are preparing to release a Scheme document and an Introductory document and convene Shareholders’ meetings to seek shareholders’ support in the second half of 2021,’ the group stated.

In the meantime, the proposed transaction is not expected to affect the day-to-day business activities and ongoing operations of CapitaLand and its listed REITs/business trusts.

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