CapitaLand China Trust (previously CapitaLand Retail China Trust) Review @ 14 February 2021

Basic Profile & Key Statistics

CapitaLand China Trust (CLCT) invests in retail and office properties. The acquisition of the business parks is in progress, so far 2 properties have completed the acquisition. As of 14 February 2021, CLCT owns 14 properties and would increase to 17 properties upon completion of remaining acquisitions.

Performance Review

Gross revenue and NPI decreased YoY by 14.2% (in SGD) and 17.9% respectively mainly due to restructuring of some leases, as well as the absence of CapitaMall Erqi contribution. Distributable income (which inclusive of S$1.8 million from the compensation received by CapitaMall Erqi and $1.8 million retentions) and DPU decreased YoY by 22.8% and 30.2% respectively.

Rental reversion for FY2020 is at -4%.

In 4Q, traffic has recovered to 83.4% and tenants' sales has recovered to 87.3% as compared to pre-COVID time.

As of today, the acquisition has completed for 49% interest in Rock Square, Ascendas Xinsu Portfolio and Ascendas Innovation Towers. 

Divestment for CapitaMall Minzhongleyuan has completed on 10 February and CapitaMall Saihan divestment is expected to be completed at 2Q 2021. CapitaMall Nuohemule has just opened on 20 December 2020.

Lease Profile

• Occupancy is moderate at 94.1%
• All income is received in RMB
• WALE is short at 2.4 years
• Highest lease expiry within 5 years is high at 36% which falls in this year
• Weighted average land lease expiry is short at 23.5 years

Debt Profile

• Gearing ratio is low at 31.8%
• Cost of debt is moderate at 2.76%
• Fixed rate debt % is moderate at 80%
• Unsecured debt % is high at 87.9%
• WADE is moderate at 2.97 years 
• Highest debt maturity within 5 years is low at 24.5% which falls in 2023
• Interest coverage ratio is moderate at 3.7 times

Diversification Profile

• Top geographical contribution is slightly low at 51.6%
• Top property contribution is moderate at 22.2%
• Top tenant contribution is low at 4.1% (from 2019 Annual Report)
• Top 10 tenants contribution is low at 17.6% (from 2019 Annual Report) 

Key Financial Metrics

• Property yield is low at 3.9%
• Management fees over distribution is not competitive at 19.5% in which unitholders receive S$ 5.13 for every dollar paid
• Distribution on capital is low at 2.3%
• Distribution margin is low at 36.2%

Trends

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

Relative Valuation

• Dividend Yield - Past 4 quarters DPU @ 6.35 cents / average yield @ 6.59% = S$ 0.965
• Price/NAV - NAV @ S$ 1.4904 x average P/NAV @ 0.92 = S$ 1.37

Author's Opinion

Favorable	Less Favorable
Low Gearing Ratio	All income is received in RMB
High Unsecured Debt %	Short WALE
Well Spread Debt Maturity	Concentrated Lease Expiry
Low Top Tenant & Top 10 Tenants Contributions	Short Weighted Average Land Lease Expiry
	Low Property Yield
	Non Competitive Management Fees
	Low Distribution on Capital
	Low Distribution Margin
	DPU Downtrend
	Interest Coverage Ratio Downtrend
	Property Yield Downtrend
	Distribution on Capital Downtrend

The 2H performance is improved slightly as compared to 1H. Moving forward, the contributions from CapitaMall Nuohemule, the 49% interest of Rock Square and the 5 business parks (2 completed, 3 in progress) would improve CLCT performance and fundamentals.

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*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 a 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. 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.