CapitaLand China Trust Review @ 18 February 2022

Basic Profile & Key Statistics

CapitaLand China Trust (CLCT) invests in retail and office properties in China, currently owns 20 properties.

Performance Highlight

Gross revenue, NPI, distributable income and DPU have improved YoY due to contributions from the newly acquired 5 business parks and 4 logistics parks, consolidation of 100% stake in Rock Square and full contribution from CapitaMall Nuohemule.

Rental Reversion

FY21 rental reversion is at -3.4% for retail portfolio and +7% for business park portfolio.

Shopper Traffic & Tenant Sales

In 2H 2021, shopper traffic is lower as compared to 2020 while tenant sales are similar. Overall in FY21, tenant sales have recovered to 81.6% of the 2019 period despite shopper traffic at only 71.3% of the same period.

Acquisition

In November 2021, CLCT completed their maiden acquisitions for 4 logistics properties.

Asset Enhancement Initiatives

There are 2 ongoing AEIs where CapitaMall Wangjing is expected to complete in 3Q 2022 and Ascendas Xinsu is expected to complete in 2Q 2022.

Related Parties Shareholding

• REIT sponsor's shareholding is slightly high at 28.713%
• REIT manager's shareholding is high at 5.884%
• Directors of REIT manager's shareholding is low at 0.051%

Lease Profile

• Occupancy is slightly high at 96.3%
• All income is received in RMB
• WALE is short at 2.2 years
• Highest lease expiry within 5 years is high at 29.8% which falls in 2022
• Weighted average land lease expiry is short at 24.76 years

Debt Profile

• Gearing ratio is moderate at 37.7%. Include perps, gearing ratio is at 39.6%.
• Cost of debt is high at 2.62%
• Fixed rate debt % is moderate at 77%
• Unsecured debt % is moderate at 80.2%
• WADM is long at 3.4 years 
• Highest debt maturity within 5 years is low at 20% which falls in 2024
• Interest coverage ratio is slightly high at 4.9 times
• Preferred/Perpetual Securities over Debts is slightly low at 4.8%

Diversification Profile

• Top geographical contribution is low at 33.7% 
• Top property contribution is low at 15.4% 
• Top 5 properties contribution is slightly low at 57.1% 
• Top tenant contribution is low at 4.1% 
• Top 10 tenants contribution is low at 17.1%

Key Financial Metrics

• Property yield is moderate at 5% 
• Management fees over distribution is slightly high at 15.5% in which unitholders receive S$ 6.45 for every dollar paid 
• Distribution on capital is low at 3.1%
• Distribution margin is low at 35.9%

Trends

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

Relative Valuation

• P/NAV - Below -1SD for 1y, 3y & 5y
• Dividend Yield - Above +1SD for 1y, 3y & 5y

Author's Opinion

Favorable	Less Favorable
Diversified Sector	Low Directors of REIT Manager's Shareholding
High REIT Manager's Shareholding	All income is received in RMB
Long WADM	Short WALE
Well Spread Debt Maturity	Concentrated Lease Expiry
Low Top Geographical Contribution	Short Weighted Average Land Lease Expiry
Low Top Property Contribution	High Cost of Debt
Low Top Tenant & Top 10 Tenants Contributions	Low Distribution on Capital
	Low Distribution Margin
	DPU Downtrend
	Interest Coverage Ratio Downtrend
	Property Yield Downtrend
	Distribution on Capital Downtrend

The 2H performance has improved a lot as compared to 1H due to full half-yearly contribution from the 5 business parks. With the maiden acquisition on logistics properties, CLCT is more diversified now. 1H 2022 performance should be better as these logistics properties would start their full half-yearly contribution.

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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.