Are There Causes for Concern at CapitaMall Trust with Falling Number of Shoppers?

CapitaMall Trust (SGX: C38U), or CMT for short, released its first quarter results yesterday. It is our city-state’s first and largest real estate investment trust (REIT) and is 27.6% owned by CapitaMalls Asia  (SGX: JS8), which also happens to be the sponsor and manager of the REIT.

Today, CMT has a portfolio consisting of 16 shopping malls that are mainly located in the suburban areas and downtown core of Singapore. These malls include Tampines Mall, Junction 8, Plaza Singapura, Bugis Junction, Bugis+ and JCube, among others. It also owns a significant stake in CapitaRetail China Trust (SGX:  AU8U), the first China shopping mall REIT to be listed in Singapore. And of course, the aforementioned shares and REITs are all part of the ubiquitous property giant, CapitaLand (SGX: C31).

For the first quarter, CMT’s gross revenue rose to S$164.7 million, up 5.8% from a year ago. The growth in gross revenue was mainly due to: 1) higher occupancy at Plaza Singapura and The Atrium@Orchard; and 2) the completion of Phase 1 of its asset enhancement initiatives (AEIs) at IMM Building.

With the increase in the REIT’s top-line, there was a corresponding gain in net property income; it went up 5.3% year-on-year to S$114.3 million. This trickled all the way down to the bottom-line where distributable income to unitholders increased 4.5% to S$89.1 million. Consequently, distribution per unit (DPU) at the REIT increased to 2.57 Singapore cents, up 4.5% from 2.46 Singapore cents in the previous year.

As of 31 March 2014, the gearing ratio was at 35.1%, a slight improvement from the 35.3% clocked at the end of 2013. The average cost of debt stood at 3.5% while CMT’s net asset value per unit came up to S$1.74.

172 leases were renewed during the quarter with a positive rental growth rate of 6.2% over preceding rental rates (which had typically been sealed three years ago). CMT’s portfolio occupancy rate as of 31 March 2014 was also high as it came in at 98.8%.

While all the figures so far look healthy for CMT, it was certainly not just a bed of roses for the REIT. Shopper traffic for the first quarter fell 1.9% year-on-year while tenant sales per square foot (psf) decreased 4%. However, despite the fall in shopper traffic and tenant sales psf -– just to point out again – gross revenue had vaulted 5.8% year-on-year. The occupancy rate at 98.8% is also commendable despite the various AEIs that took place or are taking place.

Mr Wilson Tan, CEO of the manager of CMT, said, “We will continue to focus on actively managing our existing portfolio and executing our current asset enhancement initiatives at Bugis Junction and Tampines Mall. In addition, we will embark on the next phase of asset enhancement works at IMM Building, to increase the number of outlet stores and to further strengthen its positioning as a value focused mall. We will also reconfigure Level 2 of JCube to include more than 50 retail units that will enhance the shopping experience.”

CMT closed at S$1.97 on Wednesday. This gives a price-to-book ratio of 1.1 and a distribution yield of 5.3%, using REIT’s DPU over 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 Sudhan P doesn’t own shares in any companies mentioned.