Is Capitaland India Trust A Good Buy In 2025? [Fundamental Analysis]

In this article, we'll conduct a fundamental analysis and review of Capitaland India Trust and its suitability to achieve the following investment objective: To deliver a stable dividend yield of 5% to 6% per year while having high capital preservation ability.

Business Description

CapitaLand India Trust (CLINT) is an industrial REIT focusing on mainly Hi-Tech properties in India and was listed in 2007.

What I Like About CLIT:

• The manager has a good track record in uplifting the individual property valuation and net asset valuation per share (Figure 11)

  
  

• Their underlying properties have a huge long-term growth prospect as India’s economy is expected to have tremendous growth potential given their demographic tailwinds.

  
  

• The majority of the properties are sitting on freehold land (FY2024: 76%) which significantly reduces the impact of lease decay.

  
  

• The manager has a very clear growth strategy that is supported by a strong pipeline from their sponsor.

What I Do Not Like About CLIT:

• The underlying exposure to Indian Rupee had resulted in a major negative foreign exchange rate drag on the performance and distribution of CapitaLand India Trust despite the underlying properties performing decently well when measured in Indian Rupee.

  
  

• For FY2024: 47.6% of their debt is denominated in Singapore dollars, which is a double-edged sword. While the cost of borrowing of SGD-denominated debt is lower, the unintended FX losses may result in an overall higher borrowing cost if not managed well.

Updates From Recent Performance (FY 2024)

General Comments:

• DPU from operations improved by 4.6% mainly due to income recognition from properties acquired in FY2024 and FY2023, higher rental income from existing assets and positive rent reversions.

  
  

• The management have expressed their intention and expectation to grow their data centre portfolio to contribute at least 25% of their revenue by FY2028.

  
  

• The gearing ratio increased by 2.7% to 38.5% while the cost of borrowing decreased by 0.3% to 6%.

Positive Tailwinds:

• Worsening geopolitical headwinds and worsening global ties between the West and China have provided more opportunities for countries like India as the developed economies seek to diversify and reduce their operations away from China.

Negative Headwinds:

• Further weakening of Indian Rupee might result in further performance drag, especially in a time where there is an ongoing trade war which increases the incentive for exporting nations to continue to devalue their currency further to boost exports and support GDP growth.

  
  

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Disclaimer:

This article is meant to be the opinion of the author

This article is for information purposes only

This article should not be seen as financial advice

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