Capitaland Investment Management

[weijian]

I didn't realise the point about the Cap-Ascendas merger being done for scale. Can I trouble you to elaborate on that?

hi EnSabahNur,

Before the merger, Capitaland manager was mainly in commercial/retail/hospitality, while Ascendas was managing business parks/industrial. So their merger is highly complimentary and not purely "done for scale". Of course in the AUM business, efficiencies of scale accelerate beyond the normal operating leverage that a business generally enjoys, as they centralize many of the operations (Treasury, asset managers etc) and business offerings (eg. property management).

In my earlier post, I was just saying that the current CLIM would actually be in a much smaller scale if not for the 2019 acquisition. CLIM current EV is ~27bil (14bil market cap + 13bil debt), so current prices is a good approximation to development/investment mgt BU split in late 2021. Ascenda-Singbridge was valued at ~11bil EV and so a very dirty quick back-of-envelope approximation indicates that CLIM scaled up by ~25-30% with that 2019 acquisition.

[EnSabahNur]

Thanks Weijian

[weijian]

Never felt good about these integrated property counters including CLI and city development. They take on so much debt, they only shine, if ever, when interest rates are low.

hi money,
I do share similar skepticism. But just a quick note on CLI:

(1) As end FY23, CLI's total debt is ~12.6bil. And if one divides this by its equity (exclude minority interest and perps), the gearing is ~90%, which is substantial.

(2) But do note that 2 of its listed trusts - CLAS and CLMT are consolidated on CLI's balance sheet. They are consolidated because CLI is deemed to have control as per AR. My interpretation is because CLI owns >25% for the above 2 listed trusts (CLAS-28% and CLMT-41%) and for the Manager to be voted out for a Trust structure, 75% is required. As such, CLI controls CLAS/CLMT like a subsidiary (>50% ownership), and so their balance sheet is consolidated onto CLI's.

(3) We definitely know listed REIT/Trusts are highly leveraged. So, would one consider CLAS/CLMT's debt, which is consolidated on CLI's balance sheet to be recourse to CLI? If we think it is "NO", then CLMT/CLAS's total debt of ~4billion, or ~30% of CLI's total debt should be removed from CLI when looking at its debt levels. If we account this for the gearing presented at (1) - then 90% is probably closer to 65-70%. It is still substantial I would say, but probably "better" than its peers. Of course, CLI has a mandate to want to divest its assets to its listed/unlisted funds or 3rd parties. But it is also acquiring new assets to own/manage to maturity as well. So its gearing levels are probably reflective of what it is doing.