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The Three Numbers That Fortify CapitaMall Trust

Ser Jing - Shopping for CapitaMall Trust's First Quarter Results (picture)From JCube in the West to Tampines Mall in the East, and from Sembawang Shopping Centre in the North to Raffles City in the South, CapitaMall Trust (SGX: C38U) has a mall for you. The Real Estate Investment Trust, which operates 16 separate retail properties in Singapore, is also one of the Garden City’s largest companies.

Over the last ten years, CapitaMall Trust (CMT) has delivered an exemplary total return of 9% a year for shareholders. This almost mirrors the consistent Return on Equity of around 9.8% that the trust has been able to achieve.

CMT’s solid Return on Equity can be traced back to its high Net Income Margin of 81.7%. This implies the company has delivered a bottom-line profit of $81.70 for every $100 of revenue it generated. By comparison, the median Net Income Margin for Singapore’s blue chips is around 14%.

But what CapitaMall Trust gains on the swings it loses on the roundabouts. Its Asset Turnover is just 0.08. This suggests that the asset-heavy property company is only able to generate $8 of revenue for every $100 of asset employed in the business. That, however, is better than Mapletree Commercial Trust (SGX: N21U), which only generated $7 for every $100 of asset employed.

In common with most REITs, CapitaMall Trust makes use of other people’s money. In other words, it utilises borrowings. It has debts of S$2.9b compared to shareholder equity of S$6.1b. Its Leverage Ratio of 1.5, though, is on a par with Ascendas REIT (SGX: A17U), Suntec REIT (SGX: T82U) and Frasers Centrepoint Trust (SGX: J69U).

By dismantling the RoE for CapitaMall Trust, it is easy to see what fortifies the company. Its RoE of 9.8% is the product of a exceptional Net Income Margin of 81.7%; a token Asset Turnover of 0.08 and a modest Leverage Ratio of 1.5.

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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 Director David Kuo doesn’t own shares in any companies mentioned.