REIT-TIREMENT - REIT Investing & Personal Finance

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Saturday, July 11, 2020

CapitaLand Retail China Trust Analysis @ 11 July 2020

Basic Profile & Key Statistics
CapitaLand Retail China Trust (CRCT) is a pure retail REIT with all of its properties in China.

Lease Profile
Occupancy is healthy at 95.4%. WALE at 2.3 years is low as compared to other retail SREITs/BizTrust with properties in China. All of its income is received in RMB. Highest lease expiry by GRI of 30% will be expiring this year, this posts a slight concentrated lease expiry risk. Weighted average land lease expiry is the 2nd shortest for SREITs at only 24.3years.

Debt Profile
Gearing is healthy at 35.8%. Cost of debt of 2.9% is at median level despite high unsecured debt of 94.2%. Fixed rate debt is slightly higher than median level. Interest cover is at SREITs median level of 4.3 times. WADE is short at 2.55 years, however, debt is quite well-spread. Highest debt maturity of around 20.4% will be expiring in the year 2022.

Diversification Profile
Both top geographical and top property contributions are close to SREITs median level. Both top tenant and top 10 tenants contributions are very low at 4.1% and 17.6% respectively.

Key Financial Metrics
Property yield is low at 5.2%. Management fees over distribution of 14.7% is high in which translates to S$ 6.80 dividend for every dollar paid. Distribution margin is low at 44.4%.

DPU & NAV Trend
For the past 5 years, both DPU and NAV per unit are on a slight downtrend. 

Fundamental Valuation
 Favorable Less Favorable
 Unsecured debt. 100% Income Received in RMB
 Well-Spread Debt Maturity Weighted Average Land Lease Expiry
 Top Tenant & Top 10 Tenants Contribution WADE
  Management Fees
  Distribution Margin

Relative Valuation
i) Average Dividend Yield
Dividend yield of 7.61% is based on annualized DPU for the past 1 year. Apply annualized DPU of 9.748 cents to average yield of 6.69% will get S$ 1.45.
ii) Average Price/NAV 
Average value is at 0.94, apply latest NAV of $1.55 will get S$ 1.46

Author's Opinion
There are quite some numbers of CRCT fundamental points that are close to SREITs median. Hopefully, CRCT could grow to as big as other CapitaLand group of SREITs in the future. For valuation:
i) Fundamental Intrinsic Value = (Removed)
ii) Relative Valuation - Dividend Yield = S$ 1.45
iii) Relative Valuation - Price/NAV = S$ 1.46
At the current price of S$ 1.28, it is undervalued in terms of relative valuation.

*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee the accuracy, completeness, and reliability. It should not be taken as financial advice or statement of fact. I shall not be held liable for errors, omissions as well as loss or damage as a result of the use of the material in this blog. Please always do your own due diligence before any decision is made. 

16 comments:

  1. I am holder of CRCT. If u are looking at short term, and only on dividends, some local Reits are comparable or better. But if you think China will keep on growing in the next 10-20 yrs, the growth potential of CRCT can be huge, as rents in China will continue to increase and since I had been to China for business for close to 20 yrs, the Chinese people love to go out to malls at least until today.

    ReplyDelete
    Replies
    1. Wow, I am flattered that renowned blogger like you would notice my blog. Thanks for your further insight for the potential growth. I believe CRCT management could perform better with its strong sponsor.

      Delete
  2. Hi Vince, it’s over rated to say I am renowned blogger. I saw so much dedication in your writing that captivated me.

    Guess my friend like Brian Halim is one of the most popular as we started blogging around the same time and he had since garnered so much views. He is a very good hearted person too.

    Capitaland and Mapletree Reits are really all very good Reits! Of course Fraser Ctr Pt which is a trust is one of the most popular.

    I remember CRCT is one of the few Reits or Trusts in China, so if you want exposure in China, this is the one!

    Unfortunately, stock pricing is not rising good enough over the years.

    I wrote an article in 2014 when stock price is 1.6-1.7. I think at 1.3 now, it is still good value. Good luck in your investing and GBU

    https://www.rolfsuey.com/2014/09/capitaretail-china-trust-to-continue.html?m=1

    ReplyDelete
    Replies
    1. You are renowned to me. I think the main difference between you and Bryan is that he continue to post frequently while you don't. Else you would have gained as much view as him.

      Indeed those big name you mentioned is good REIT. But how good ? what good? why good? Haha, those are the questions. So in my analysis, I tried "my best" to be objective and present with data/fact. As per my analysis on AREIT and CMT, I tried to quantify those "good" and listed out plus & negative points.

      Your post is really very long ago, lol. Can see you are a strong supporter for CRCT since long time. I think forex play a part in this REIT too. For past 5 years, RMB has been depreciating against SGD, albeit very slowly.

      Delete
  3. Hi Vince,
    *Flattered* by ur kind words. Anyway, I had sold CRCT long time ago and only pick up after the covid... but my pricing is not so good at 1.3. Still, I think it’s a feasible buy, because I heard from my Chinese friends that life and visiting malls are back to normal. So maybe Sg retail reits will do well next year depending how well we curb the virus situation.

    So far, all my chinese friends from diff cities all told me that it was very well contained in China and the govt are extremely strict and people are extremely careful and having heightened precaution themselves!



    ReplyDelete
    Replies
    1. As long as you have done your study and confidence, then is ok. Everyone will have different intrinsic value in mind and we couldn't always get at the lowest price.

      If you really like China properties, there are others SREITs like BHG, Sasseur also.

      Delete
  4. Hi Vince, it’s good to have reits for dividends but frankly STI or sgx stocks are really too laidback. The future is in my opinion technology esp after this covid 19 situation. Even Buffett largest holdings is in Apple which is more than 40-50% of his holdings...

    spent some time to visit US and HK market and u will find that tech stocks is the future...

    https://www.rolfsuey.com/2020/05/why-sti-index-investing-is-not-as.html?m=1

    ReplyDelete
    Replies
    1. Ur post is quite detailed which trace back to 1985, my birth year, haha. With recently COVID, can really see STI is lagging behind as compared to US indices. Not sure why STI only include 30 stocks in its list, which couldn't really represent the whole picture Singapore market/economy. WB once said he wouldn't invest in tech stock, lol. Gurufocus website shows that Apple is his 35% holding as of 3rd June.

      Delete
  5. https://www.cnbc.com/berkshire-hathaway-portfolio/

    BH: Apple 95BUSD market value out of 220BUSD. Have not include Amazon!

    ReplyDelete
  6. Hi Vince. Thanks for your selfless sharing of knowledge! I'd like to ask where it is that mentioned 100% of distributable income is received in RMB i.e. no hedging? I can't seem to find it on the annual report nor the presentation.

    ReplyDelete
    Replies
    1. Hi Dylan, thanks for your compliment, this post is based on previous result. I would soon post another CRCT review based on its latest result. CRCT hedged 64.4% of undistributed income as per latest presentation. However, I never take into consideration for hedging in my dashboard as it won't provide protection for long term currency depreciation, should it happen.

      Delete
    2. I see... I'd assumed you'd included it in the calculation of "income in SGD/major currencies". Can I verify how you calculate "income in SGD/major currencies"? Do you calculate it via property by GRI? So in CRCT's case it's 0% because all of its properties -> income are from China?

      Delete
    3. I would calculate by GRI weightage, provided REIT share the information. Yes you are right, because all in come is received in RMB, that is the reason for 0%.

      Delete
    4. Thanks for the prompt reply!

      Delete
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    ReplyDelete