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CapitaLand Commercial Trust’s Latest Earnings: What Investors Need to Know

CapitaLand Commercial Trust  (SGX: C61U) released its fiscal second-quarter earnings report this morning. The reporting period was from 1 April 2015 to 30 June 2015.

CapitaLand Commercial Trust, which is managed by a wholly-owned subsidiary of CapitaLand Limited (SGX: C31), is one of the largest commercial real estate investment trusts (REITs) in Singapore by market capitalization.

At the local front, the REIT has ownership over properties such as Capital TowerSix Battery Road, and the Golden Shoe Car Park. It also has partial stakes in Raffles City Singapore, and a 30% stake in Quill Capita Trust in Malaysia.

You can learn more about the REIT in here and here.

Financial highlights

The following’s a quick take on CapitaLand Commercial Trust’s latest financial figures:

  1. Gross revenue was $69.1 million in the reporting quarter, up a solid 5% from the same quarter a year ago.
  2. Net property income (NPI) rose 3.6% year on year to $53.9 million as a result.
  3. Distribution per unit (DPU) for the reporting quarter will be 2.19 cents, a slight 0.5% increase from the 2.18 cents seen in the second quarter of 2014.
  4. As of 30 June 2015, the value of CapitaLand Commercial Trust’s investment properties stood at $7.4 billion. The REIT’s adjusted net asset value per unit also clocked in at $1.72, up 3.0% from a year ago.

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 the REIT is funded and its sensitivity to the interest rate environment. These are summarised for CapitaLand Commercial Trust below:

2015-07 Capitaland Commercial Debt Table

Source: CapitaLand Commercial Trust’s earnings presentation

The REIT has outstanding debt of $556 million to refinance this year. Of this amount, the REIT has credit facilities to refinance $200 million. The remaining amount of $356 million (due December 2015) is at an advanced negotiation stage.

Additionally, an amount of $621 million will also be due the following year. The progress in refinancing of debt is where Foolish investors should keep a watchful eye on.

Operational highlights

CapitaLand Commercial Trust ended the reporting quarter with a portfolio committed occupancy of 98%, down from the figure of 99.4% a year ago. The REIT’s CapitaGreen property had an aggregate committed occupancy of 80.4%, which pulled down the overall occupancy score for the reporting quarter.

On a brighter note, investors might be happy to know that the REIT’s average office rent has grown from $8.23 per square feet per month a year ago to $8.88 per square feet per month. Meanwhile, the weighted average lease term to expiry was 7.7 years at the end of June 2015.

Summing up the quarter, Lynette Leong, Chief Executive Officer of the REIT’s Manager, had these comments to add:

“We are pleased that CCT has delivered a continued rise in DPU over the first half of 2015. Continued growth in CCT’s portfolio occupancy rate to 98.0% and increase in monthly average office portfolio gross rent to S$8.88 psf reflect the resilience of CCT’s portfolio. The Trust’s balance sheet remains robust with a low gearing of 29.5%. 83.0% of the Trust’s borrowings are on fixed interest rates which minimises CCT’s susceptibility to rising interest rates. CCT also has the financial flexibility to execute potential growth opportunities, with debt headroom of S$1.3 billion assuming 40.0% gearing.

In anticipation of the relatively large new office supply in 2016 and 2017, we have been focusing our efforts on driving stable and sustainable financial performance. Since 2014, we have been actively reducing the amount of lease expiries in 2016 and 2017 as well as extracting operational efficiencies in property management. We are also exploring new, flexible alternatives of office space utilisation to generate new demand for the Trust’s space.”

Foolish summary

CapitaLand Commercial Trust closed at S$1.48 today. This translates to a historical price-to-book ratio of 0.87 and a trailing-12-months distribution yield of around 5.8%.

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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.