Capitaland Mall Trust’s Latest Earnings: What’s Next After A 2.9% Slip In Revenue?

Capitaland Mall Trust  (SGX: C38U) released its fiscal second-quarter earnings report this morning. The reporting period was from 1 April 2015 to 30 June 2015.

Capitaland Mall Trust is a real estate investment trust which owns stakes in popular retail malls such as Raffles CityPlaza Singapura, and Bugis Junction. All told, the REIT’s portfolio currently consists of 16 retail malls in Singapore.

You can learn more about Capitaland Mall Trust in here and here, or catch its previous quarter’s earnings here.

Financial highlights

Here’s a quick take on the REIT’s latest set of financial figures:

  1. Gross revenue for the reporting quarter slipped 2.9% year over year to $159.6 million. Capitaland Mall Trust’s Manager commented that the fall in gross revenue came from ongoing asset enhancement initiatives (AEI) at IMM and Bukit Panjang Plaza.
  2. With the lower revenue, net property income (NPI) followed suit with a 4% decline from $114 million in the same quarter a year ago to $109.5 million.
  3. That said, the REIT’s distribution per unit (DPU) for the quarter still managed to inch up by 0.7% to 2.71 cents from 2.69 cents seen a year ago.
  4. Capitaland Mall Trust’s investment properties are valued at $10.3 billion as of 30 June 2015 and it ended the fiscal second-quarter with an adjusted net asset value per unit of $1.81, up 2.8% year over year.

Beyond these, Foolish investors might also want to keep an eye on the REIT’s debt profile. The debt profile may provide clues on how a REIT is funded and its sensitivity to the interest rate environment. These are summarised for Capitaland Mall Trust below.

2015-07 Capitamall Debt Table

Source: Capitaland Mall Trust’ earnings presentation

The REIT ended the quarter with about $3.4 billion in borrowings. Compared to the previous quarter, Capitaland Mall Trust has managed to make some progress in strengthening its balance sheet. For instance, the REIT’s aggregate leverage and average cost of debt has stepped down a little while the interest coverage and average term to maturity for its borrowings has improved.

Overall, the borrowing profile for Capitaland Mall Trust is fairly well distributed by year. But, Foolish investors should continue to keep a watchful eye on the progress in the REIT’s refinancing of its debt.

Operational highlights

Capitaland Mall Trust ended the reporting quarter with an overall portfolio occupancy of 96.4%, a drop from the selfsame figure of 97.2% compared to the quarter ended 31 March 2015.  The REIT also had a weighted average lease expiry (by gross rental income) of 2.2 years.

For the first half of 2015, Capitaland Mall Trust renewed (or signed new contracts) for 355 leases with an average positive rental reversion of 4.6%.

The REIT’s malls (excluding Bugis Junction) also enjoyed year over year increases of 3.4% and 2.9% in shopper traffic and tenant sales per square feet per month, respectively, in the first half of 2015. These might be important data points to observe going forward as online shopping gains in prominence.

Wilson Tan, Chief Executive Officer of Capitaland Mall Trust’s Manager, had these comments to add regarding the REIT’s performance and future:

“For the first half of 2015, we continued to deliver good operational performance. We registered year-on-year increases of 3.4% in shopper traffic and 2.9% in tenants’ sales. Portfolio occupancy as at 30 June 2015 remained high at 96.4%, despite ongoing asset enhancement initiatives and reconfiguration works at some of our malls.

As part of our proactive asset management strategy, Clarke Quay has been undergoing reconfiguration works at Block C. About 57,000 square feet of space is being reconfigured to house new entertainment and food & beverage (F&B) tenants including Zouk, a worldclass club, which will take up about 31,000 square feet. This will further strengthen Clarke Quay’s position as Singapore’s most popular riverfront F&B and entertainment hub.

In addition, we will commence interior rejuvenation works at Plaza Singapura in the third quarter to enhance the shopping experience and reinforce its position as the destination mall for families and friends, centrally located on Orchard Road.”

Investors might also want to note that Capitaland Mall Trust had announced the acquisition of Bedok Mall for $738 million last week.

Foolish summary

Capitaland Mall Trust opened this morning at S$2.17. This translates to a historical price-to-book ratio of 1.14 and a trailing-12-months distribution yield of around 5.1%.

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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 Chin Hui Leong doesn’t own shares in any companies mentioned.