CapitaLand India Trust: A Comprehensive Overview

CapitaLand India Trust (CLINT) is a Singapore-listed property trust providing exposure to the rapidly growing Indian market. Its portfolio is predominantly focused on the Information Technology (IT) sector, with 11 IT parks across major cities such as Mumbai, Hyderabad, Bangalore, and Chennai. Over the years, the trust has diversified into logistics, industrial facilities, and data center (DC) developments, cementing its position as a forward-looking player in the real estate sector.

Key Highlights

• FY24 Financial Performance: CLINT reported a 19% growth in total property income (SGD 277.9 million) and a 14% increase in net property income (NPI) (SGD 205.6 million). However, NPI margins dropped to 72% in 2H24, compared to 76% in 2H23, due to rising operating costs.
• Occupancy Rates and Rental Reversions: Occupancy improved by 1 percentage point to 92%, with rental reversions ranging between +1% and +9%. However, a 1% drop at aVance Hyderabad was attributed to a rent-free period.
• Divestment Plans: CLINT is in advanced stages of divesting its 33% minority stake in DCs to a fund sponsored by CapitaLand Investment Limited. The expected cost savings from this divestment should offset income losses. Additionally, the divestment of CyberPearl and CyberVale is expected to be finalized by February 2025.
• Gearing and Debt Management: Gearing decreased from 40.1% to 38.5%, supported by revaluation gains on assets. The average cost of debt remains steady at 6%, and the trust’s assets have grown in value by approximately 15.5% in FY24.
• Fair Value Estimate: The fair value estimate has been slightly adjusted from SGD 1.28 to SGD 1.27 due to an increase in the risk-free rate assumption from 2.5% to 2.75%.

ESG Commitment

CLINT has made significant strides in sustainability, with 99% of its portfolio certified as green buildings. Recent initiatives include the commissioning of a 21-megawatt captive solar plant in Tamil Nadu, which has increased renewable energy usage by over 70%. Additionally, the appointment of an Independent Chair of the Audit and Risk Committee has bolstered governance, contributing to an upgraded ESG rating.

Investment Recommendation

OCBC Investment Research maintains a BUY rating on CLINT, citing its strategic positioning in India’s growing economy, progressive portfolio expansion, and commitment to sustainability. The projected distribution yields for FY25 and FY26 are 7.1% and 7.6%, respectively.

Peer Comparisons

Mindspace Business Parks REIT

Mindspace Business Parks REIT is a key competitor in the Indian commercial real estate market. It boasts a strong portfolio with a focus on IT parks and commercial spaces.

Key Metrics

• Price/Earnings (FY25E): 34.6
• Price/Book (FY25E): 1.7
• Dividend Yield (FY25E): 5.7%
• Return on Equity (FY25E): 4.7%

Embassy Office Parks REIT

Embassy Office Parks REIT is another major player, primarily focusing on office spaces in metropolitan cities across India.

Key Metrics

• Price/Earnings (FY25E): 33.6
• Price/Book (FY25E): 1.4
• Dividend Yield (FY25E): 6.3%
• Return on Equity (FY25E): 5.0%

Brookfield India Real Estate Trust

Brookfield India Real Estate Trust offers a diversified portfolio of high-quality office spaces in key Indian cities.

Key Metrics

• Price/Earnings (FY25E): 48.5
• Price/Book (FY25E): 1.3
• Dividend Yield (FY25E): 6.4%
• Return on Equity (FY25E): 2.8%

Valuation Analysis

Among its peers, CLINT stands out with a competitive valuation. It offers a Price/Earnings ratio of 10.9x for FY25E, significantly lower than its competitors. The trust also boasts a forward Price/Book ratio of 0.8x, underscoring its value proposition for investors. Additionally, its projected dividend yields of 7.2% (FY25E) and 7.9% (FY26E) make it a compelling choice for income-focused investors.

Conclusion

CapitaLand India Trust, with its diversified portfolio, forward-looking strategies, and strong ESG commitment, is well-positioned to capitalize on the immense growth opportunities in India’s real estate sector. While peers like Mindspace Business Parks REIT, Embassy Office Parks REIT, and Brookfield India Real Estate Trust have their strengths, CLINT’s emphasis on data centers, sustainability, and strategic divestments gives it a distinct edge. With a BUY rating, CLINT remains a promising investment opportunity for those seeking exposure to the Indian real estate market.