CapitaMall Trust’s Latest Earnings: Steady Growth for Unitholders

CapitaMall Trust (SGX: C38U) released its fiscal first-quarter earnings, covering the three months ended 31 March 2015, yesterday morning.

The real estate investment trust owns 16 shopping malls located all over our sunny island. These malls include Tampines MallJunction 8Plaza SingapuraBugis JunctionBugis+, JCube and more.

In addition, the trust also owns a significant stake in CapitaRetail China Trust  (SGX: AU8U), the first China shopping mall REIT listed in Singapore. Both trusts are under the corporate umbrella of the giant Singapore-based property group, CapitaLand Limited  (SGX: C31).

As of 31 March 2015, “the total deposited properties size” of CapitaMall Trust is around S$10.9 billion. With all these as a backdrop, let’s dive into the REIT’s latest set of figures.

Financial highlights

For the first quarter of 2015, CapitaMall Trust’s gross revenue inched up 1.6% year-on-year to S$167.3 million. This was mainly due to a S$2.1 million increase in gross revenue at Bugis Junction after some sprucing up of the mall was completed last September.

Consequently, net property income grew 3% year-on-year to S$117.7 million while distributions per unit (DPU) increased 4.3% to 2.68 Singapore cents.

As of 31 March 2015, CapitaMall Trust had a gearing ratio of 33.8%, an improvement from the figure of 35.1% seen a year ago. Other important aspects of the REIT’s financial strength are highlighted in the table below:

CapitaMall Trust's balance sheet figures (31 March 2015)

Source: S&P Capital IQ

As you can tell from above, CapitaMall Trust has either maintained or made some improvements to the strength of its balance sheet when compared to a year ago.

Besides a step down in the aggregate leverage ratio (as mentioned earlier), the REIT has also managed to improve its interest coverage and lower the cost of its borrowings slightly. It’s also worth pointing out that the REIT has managed to extend the average maturity of its borrowings from 4 years to 5.1 years.

CapitaMall Trust ended 31 March 2015 with a very well distributed debt-maturity profile (the expiry date of the trust’s various loans extend from 2015 to 2027) with no single calendar-year having more than S$505 million worth of borrowings coming due. For some perspective, the REIT has total borrowings of S$4.1 billion as of 31 March 2015 (inclusive of CapitaMall Trust’s share of borrowings stemming from its partial ownership of other trusts).

The REIT ended the first quarter of 2015 with an adjusted net asset value per unit of S$1.80, up 5.3% from the figure of S$1.71 seen a year ago.

Operational highlights

CapitaMall Trust’s portfolio occupancy rate, as of 31 March 2015, came in at 97.2%. This was lower than the 98.8% figure seen at end-March 2014.

The latest reporting period saw a lower occupancy rate mainly due to ongoing asset enhancement works at IMM Building and Bukit Panjang Plaza.

As of 31 March 2015, the occupancy rate at IMM Building was at 95.4% while the selfsame figure at Bukit Panjang Plaza was at 92.7%; both rates are currently at their lowest since the malls were acquired by CapitaMall Trust in 2003 and 2007, respectively. Investors should monitor the situation closely to see if the occupancy rates pick up once the enhancement works are completed.

On a positive note, CapitaMall Trust’s malls saw shopper traffic increase by 4.7% year-on-year while tenants’ sales managed to climb by 2.5%. This is a nice improvement over the first quarter of 2014 when the REIT’s shopper traffic and tenants’ sales fell by 1.9% and 4.0% respectively on a year-on-year basis.

CapitalMall Trust also delivered another bright note when it experienced positive rental reversions of 6.1% for the first quarter of 2015.

In the earnings release, Wilson Tan, chief executive of CapitaMall Trust’s Manager, gave some updates on the REIT’s ongoing efforts to improve the retail experience at its malls:

“We constantly reinvent and rejuvenate our malls with a view to reap future benefits for our unitholders.

We are pleased to update that Clarke Quay has completed its reconfiguration works at Block A. New-to-market brands include McGettigan’s, an authentic modern Irish pub from Ireland; Motorino, a popular pizza joint from New York; and Catch!, a new homegrown eatery offering fish and chips.

In addition, the asset enhancement works for IMM Building, Bukit Panjang Plaza and Tampines Mall have made good progress and are on track to be completed as scheduled.”

Foolish Summary

Going forward, CapitaMall Trust’s Manager will focus on the remaining leases due for renewal this year as well as look at ways to grow the REIT’s portfolio.

CapitaMall Trust last traded at S$2.24 per unit yesterday. It’s valued at 1.24 times its latest adjusted book value and has a  trailing-12-months distribution yield of 4.9%.

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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.