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Wednesday, August 11, 2021

CapitaLand China Trust Review @ 11 August 2021

Basic Profile & Key Statistics

CapitaLand China Trust (CLCT) invests in retail and office properties in China, currently owns 16 properties.

Performance Highlight

Performance increased YoY mainly due to contribution from the newly acquired business parks, CapitaMall Nuohemule as well as lower rental relief.

Rental reversion for retail is at -2.1% while for office is at 6.7%.

Both shopper traffic and tenant sales increased YoY by more than 40%. 

The acquisition of the 5 business parks is completed in 1H 2021. Though the acquisition of Singapore-Hangzhou Science & Technology Park Phase I and Phase II were only completed in June, the contribution was started in February. 

In 1H 2021, CLCT divested both CapitaMall Saihan and CapitaMall Mingzhongleyuan.


AEI for Rock Square has been completed and more than 30 new shops have opened. AEI for CapitaMall Yuhuating is ongoing where Level 1 is expected to complete by 3Q. 

Related Parties Shareholding

  • REIT sponsor's shareholding is high at 30.69%
  • REIT manager's shareholding is high at 5.78%
  • Directors of REIT manager's shareholding is low at 0.06%

Lease Profile

  • Occupancy is slightly high at 95%
  • All income is received in RMB
  • WALE is short at 2.3 years
  • Highest lease expiry within 5 years is moderate at 26% which falls in 2022
  • Weighted average land lease expiry is short at 25.26 years

Debt Profile

  • Gearing ratio is moderate at 35.9%
  • Cost of debt is moderate at 2.57%
  • Fixed rate debt % is moderate at 78%
  • Unsecured debt % is moderate at 81.4%
  • WADM is long at 3.8 years 
  • Highest debt maturity within 5 years is low at 22.4% which falls in 2023
  • Interest coverage ratio is high at 4.4 times
  • Preferred/Perpetual Securities over Debts is moderate at 5.5%

Diversification Profile

  • Top geographical contribution is low at 39.7% 
  • Top property contribution is moderate at 17.6% 
  • Top 5 properties contribution is moderate at 62.9% 
  • Top tenant contribution is low at 4.1% 
  • Top 10 tenants contribution is low at 17.1%

Key Financial Metrics

  • Property yield is low at 4.4% 
  • Management fees over distribution is high at 16.8% in which unitholders receive S$ 5.95 for every dollar paid 
  • Distribution on capital is low at 2.7%
  • Distribution margin is low at 36.7%

Trends

  • Flat - NAV per Unit, Distribution Margin
  • Downtrend - DPU, Interest Coverage Ratio, Property Yield, Distribution on Capital

Relative Valuation

  • P/NAV - Average for 1y and 3y; Below average for 5y
  • Dividend Yield - Above average for 1y; Below average for 3y; Below -SD for 5y

Author's Opinion

FavorableLess Favorable
Diversified SectorLow Directors of REIT Manager's Shareholding
High REIT Sponsor's ShareholdingAll income is received in RMB
High REIT Manager's ShareholdingShort WALE
Long WADMShort Weighted Average Land Lease Expiry
Well Spread Debt MaturityLow Property Yield
High Interest Coverage RatioNon-Competitive Management Fees
Low Top Geographical ContributionLow Distribution on Capital
Low Top Tenant & Top 10 Tenants ContributionsLow Distribution Margin
 DPU Downtrend
 Interest Coverage Ratio Downtrend
 Property Yield Downtrend
 Distribution on Capital Downtrend

CLCT fundamentals and performance have improved as compared to last year, however, DPU is still lower than pre-COVID level. For 2H, CLCT would benefit from the full half-yearly contribution from the 5 business parks and the new shops in Rock Square. CLCT has also released its 5 years roadmap as below, which targets to expand new economy assets and integrated development/commercial properties. 


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*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee accuracy, completeness, and reliability. It should not be taken as financial advice or a statement of fact. I shall not be held liable for errors, omissions and loss or damage as a result of the use of the material in this blog. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.

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