CapitaLand Investment Limited (CLI)
CapitaLand Investment Limited (CLI) is a global real asset manager that has recently taken a significant step by acquiring a freehold land parcel in Osaka, Japan, to develop its first data center in the country. This project represents a massive investment totaling over US\$700 million (approximately S\$944.3 million) and includes securing 50 megawatts (MW) of power capacity.
CLI’s acquisition highlights its strong global multi-asset class network and deal-sourcing capabilities. Since 2021, CLI has added 23 data centers to its global portfolio, bringing its total to 27 across Asia and Europe. These facilities boast an 800 MW power capacity and around S\$6 billion in assets under management on a completed basis.
According to Mr. Manohar Khiatani, Senior Executive Director of CLI, the company’s expansion into Japan aligns with its focus on digitalization and strengthens its geographical presence. Japan, as Asia Pacific’s largest data center market outside of China, is projected to grow at a compound annual growth rate (CAGR) of 10%, reaching US\$38.7 billion by 2028. Major cloud providers like Amazon Web Services, Google Cloud, and Microsoft Azure already have a strong presence in Osaka, solidifying CLI’s positioning within this cluster.
Ms. Michelle Lee, Managing Director of Private Funds (Data Centre) at CLI, emphasized the surging demand for data centers due to rapid digitalization and AI adoption. CLI has successfully raised US\$600 million (S\$810 million) since October 2020 for its data center development funds in Asia. The upcoming Osaka data center will be AI-ready, designed for sustainability, and certified under green standards, including LEED. The facility will feature advanced cooling technologies and energy-saving solutions to minimize environmental impact.
CLI’s ability to deliver world-class data center solutions was recently demonstrated when CapitaLand India Trust signed a long-term agreement with a leading global hyperscaler. With its strong balance sheet and yield of over 5%, CLI remains a key player in the data center industry. The report recommends accumulating CLI shares, given its price-to-book ratio of 0.9x and a Bloomberg consensus target price of \$3.52, implying a 46% upside.
Keppel Infrastructure Trust (KIT)
Keppel Infrastructure Trust (KIT) posted an impressive performance for FY2024, with Funds from Operations (FFO) rising by 10.3% year-on-year (YoY) to \$282 million. Distributable Income (DI) reached \$203.7 million, backed by steady portfolio performance and contributions from the Keppel Merlimau Cogen Plant (KMC), the German Solar Portfolio, and Ventura acquisitions.
Adjusted DI for FY2024 stood at \$218.7 million, reflecting a 4.3% increase over FY2023. KIT achieved a Distribution per Unit (DPU) of 3.90 cents, a 1.0% YoY growth excluding special distributions. The portfolio delivered a 4.9% YoY growth in Asset Distributable Income, driven by strong contributions from the Energy Transition and Distribution & Storage segments.
Key developments included the acquisition of a 45% stake in a German residential solar portfolio comprising 60,000 bundled solar photovoltaic (PV) systems with a combined capacity of 585 MW. In Singapore, City Energy achieved 100% plant availability and expanded its EV charging business to approximately 4,800 carpark lots. KMC’s capacity tolling agreement was extended to 2040, contributing \$37 million to KIT’s Asset Distributable Income.
KIT also acquired the Keppel Marina East Desalination Plant (KMEDP), Singapore’s first dual-mode desalination plant, ensuring stable cash flows until 2045. Operations at other facilities like the Senoko WTE Plant and Keppel Seghers Tuas WTE Plant remained stable.
Despite its strong performance, KIT’s market cap of S\$2.8 billion and a dividend yield of 5-6% translate to only an 8% upside to its consensus target price of S\$0.50. The report recommends a HOLD rating for KIT.
Hong Kong Property Market Updates
The Hong Kong government has removed onerous property cooling measures, including the Special Stamp Duty and additional levies for foreigners and multiple property owners. The changes aim to rejuvenate a market that has stagnated, with over 91,300 unsold flats as of year-end 2023.
The removal of these levies is expected to boost transaction volumes and accelerate price discovery, particularly in a city that heavily relies on real estate for fiscal income. However, the influx of unsold units could pressure the housing market further.
US and China Market Insights
Inflation remains a focal point in the US market, with headline and core PPI inflation rising to their highest annual rates since early 2023. However, leading indicators suggest subdued price pressures, making a second wave of inflation unlikely. The report maintains a defensive asset allocation stance, anticipating growth to drive markets over a 6-to-12 month horizon.
In China and Hong Kong, fiscal income from land sales continues to decline, raising concerns about the broader economic impact.
