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Tuesday, February 14, 2023

CapitaLand China Trust Review @ 14 February 2023

Basic Profile & Key Statistics
  • Main Sector(s): Retail, Office & Logistics
  • Country(s) with Assets: China
  • No. of Properties (exclude development/associate/fund): 20

Key Indicators

Performance Highlight
Gross revenue, NPI, the amount available for distribution and DPU declined yoy mainly due to most malls being mandated to close for various days due to rising COVID cases, higher rental relief and an increase in interest costs.

Shopper Traffic & Tenant Sales

Both shopper traffic and tenant sales have declined yoy due to longer periods of mall closure and restrictions.

Rental Reversion

FY 22 rental reversion achieved positive 2.7% and 6.4% for the retail segment and the new economy segment respectively.

Asset Enhancement Initiative

The AEI for CapitaMall Yuhuating phase 2 and CapitaMall Grand Canyon is expected to be completed in 1Q 2023. 

Interest Rate

For every 0.5% increase in interest, the DPU impact would be 0.15 cent, equivalent to 2%.

Distribution Breakdown
  • Distributable Income Breakdown:
    • 86.8% from Operation
    • 12.2% from Fees Payable/Paid in Units
    • 1% from Income Support
  • Distribution = 99.9% of Distributable Income
  • Distribution to Perpetual Securities Holder = 2.7% of Distributable Income

Related Parties Shareholding

  • REIT Sponsor's Shareholding: Above median for more than 10%
  • REIT Manager's Shareholding: Above median for more than 20%
  • Directors of REIT Manager's Shareholding: Below median for more than 20%

Lease Profile

  • Occupancy: ± 5% from median
  • All income is received in RMB
  • WALE: Below median for more than 20%
  • Highest Lease Expiry within 5 Years: Above median for more than 20%; Falls in this year
  • Weighted Average Land Lease Expiry: Below median for more than 20%

Debt Profile

  • Gearing Ratio: ± 10% from median
  • Gearing Ratio including Perps: ± 10% from median
  • Cost of Debt: ± 10% from median
  • Fixed Rate Debt %: ± 10% from median
  • Unsecured Debt %: ± 10% from median
  • WADM: Above median for more than 20%
  • Highest Debt Maturity within 5 Years: Below median for more than 20%; Falls in 2025
  • Interest Coverage Ratio: ± 10% from median

Diversification Profile

  • Top Geographical Contribution: Below median for more than 20%
  • Top Property Contribution: Below median for more than 20%
  • Top 5 Properties' Contribution: ± 10% from median
  • Top Tenant Contribution: Below median for more than 20%
  • Top 10 Tenants' Contribution: Below median for more than 20%

Key Financial Metrics

  • Property Yield: ± 10% from median
  • Management Fees over Distribution: Above median for more than 10%; $5.75distribution for every dollar paid 
  • Distribution on Capital: Below median for more than 10%
  • Distribution Margin: Below median for more than 20%


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

Relative Valuation

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

Author's Opinion

 Favorable Less 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 WADMConcentrated Lease Expiry
Well Spread Debt MaturityShort Weighted Average Land Lease Expiry
Low Top Geographical ContributionNon Competitive Management Fees
Low Top Property ContributionLow Distribution on Capital
Low Top Tenant & Top 10 Tenants' ContributionsLow Distribution Margin
 DPU Downtrend
 NAV per Unit Downtrend
 Interest Coverage Ratio Downtrend
 Property Yield Downtrend
 Distribution on Capital Downtrend
 Distribution Margin Downtrend

The mandate closure of malls and the COVID-19 restrictions imposed have negatively impacted CLCT performance. Fortunately, in early December 2022, China lifted the COVID-19 controls, and this has led to an improvement in traffic and tenant sales starting from the last week of December. Looking ahead, CLCT is poised to benefit from the expected recovery of consumer spending in 2023.

In addition, CLCT has outlined its plans to cease operations at CapitaMall Qibao by 1H 2023 in an effort to reduce operating expenses. This mall represents 0.1% in terms of valuation as of 31 Dec 2022 and 3.8% in terms of gross revenue for FY2021.

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*Disclaimer: The information presented on this blog is for educational and informational purposes only. The materials, including research and opinions, are based solely on my own findings and should not be considered as professional financial advice or a definitive statement of fact. I cannot guarantee the accuracy, completeness, or reliability of the information provided. I shall not be held liable for any errors, omissions, or losses that may occur as a result of using the information presented on this blog. It should be noted that the information presented on this blog does not constitute a buy, sell, or hold recommendation for any security. It is crucial to conduct your own thorough research and due diligence before making any investment decisions.

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