Shopping for CapitaMall Trust’s First Quarter Result

CapitaCommercial Trust (SGX: C38U) released its first quarter results on Friday morning and the market did not seem to take it too well despite it posting a 3.3% increase in distributable income to S$55.7m  – shares were down 2.6% to $1.66. Will CapitaMall Trust (SGX: C61U) follow suit? Both trusts are managed by Capitaland Limited (SGX: C31), which rose 1.7% to $3.51.

CMT, which consists of retail malls, released its first quarter results on Friday after the market had closed. The REIT saw an 11.3% increase in quarterly distributable income from S$76.6m a year ago to S$85.3m. But, its distribution per unit (DPU) only grew 7% from S$0.023 to S$0.0246.

The REIT’s gross revenue for the quarter had risen by 14.8% from S$155.2m last year to S$178.2m. The growth can be attributed to higher rental income from JCube, Bugis+ and The Atrium@Orchard after their asset enhancement initiatives (AEI) were completed.

Net property income growth for the quarter clocked in at 15.5% year-on-year from S$108.3m to S$125.1m as operating expenses for CMT’s properties grew by only 13.2% from S$46.9m to S$53.1m.

Shoppers in Singapore were out in force in the first quarter of 2013 as CMT saw year-on-year increases for both shopper traffic and tenants’ sales. The former grew by 4.3% while the latter had 2.4% growth.

The trust has managed to keep its occupancy rate at a very healthy 98.3% for the quarter. CMT also saw positive rental reversions for its portfolio that averaged 6.2%. It seems Singapore’s property-rental market’s going strong with lessees willing to take on higher rentals. Ascendas REIT (SGX: A17U), which has significant operations in Singapore but with different types of properties, saw positive rental reversions for the first quarter of 2013 and it was the same scenario for Mapletree Logistics Trust (SGX: M44U).

Looking at CMT’s balance sheet, it has a net asset value per unit of $1.64 (excluding distributable income). Its gearing ratio has decreased from 36.7% a year ago to 35.2%. The average cost of debt remains the same at 3.3%, but its interest coverage has increased year-on-year from 3.9 times to 4.3 times.

The REIT had redeemed S$300m worth of retail bonds on 25 February 2013 and is looking to redeem S$107.4m worth of convertible bonds on July 2013. These convertible debt instruments have a conversion price of S$3.39. There will not be any issue with the redemption of the bonds as CMT has already obtained the required funding.

CMT remains committed to paying out 100% of distributable income in financial year 2013 to its unit holders. The Chief Executive Officer of CMT’s Manager, Mr Wilson Tan, commented briefly on their outlook: “We continue to identify good value creation opportunities in our asset portfolio. We will soon start our asset enhancement works at Bugis Junction in the second quarter. This project is expected to contribute a return on investment of about 9.0% upon stabilisation. We have also committed the space formerly vacated by Carrefour at Plaza Singapura to two new tenants. For IMM Building, our repositioning exercise is progressing well and we have secured 50 outlet brands for the mall.”

At Friday’s closing price of $2.26, the REIT’s trading at 1.4 times its book value and sports a distribution yield of 4.3% based on its DPU for the last 12 months.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chong Ser Jing doesn’t own shares in any companies mentioned.