Latest Earnings From CapitaLand Retail China Trust

CapitaLand Retail China Trust (SGX: AU8U) was the first China shopping mall real estate investment trust to be listed back in 2006 in Singapore’s stock market.

The REIT currently has 10 properties in its portfolio which cumulatively carry a valuation of RMB10.9 billion (around S$2.6 billion).

The REIT had released its earnings for the quarter and year ended 31 December 2015 yesterday morning. Let’s have a look at it to see how the REIT has performed.

Revenue and distributions

For the reporting quarter, the REIT’s total gross revenue grew by 6.7% year-on-year to S$56.2 million while net property income (NPI) had increased by 5.2% to S$35.3 million.

Full year revenue for the REIT came in at S$220.3 million, which was 8.4% higher compared to the year before. This had led to NPI for the year growing by 6.6% to S$141 million.

CapitaLand Retail China Trust’s healthy gross revenue and NPI trickled to the bottom-line with the REIT’s income available for distribution increasing 6.5% year-on-year to S$21.8 million for the reporting quarter. This led to a 4.4% uptick in the distribution per unit (DPU) to 2.59 Singapore cents.

Similarly for the full year, the REIT’s distributable income increased by 10.3% to S$89.2 million. This resulted in a 7.9% climb in the DPU to 10.6 Singapore cents.

The growth numbers were favoured by currency movements:  The REIT’s performance in terms of the renminbi had been lackluster. For instance, for the whole of 2015, CapitaLand Retail China Trust’s gross revenue and NPI had grown by only 1.8% and 0.1%, respectively.

CapitaLand Retail China Trust ended 2015 with an adjusted net asset value of S$1.72, up 8.9% from a year ago.

Financial strength

Moving on to the balance sheet, the REITs gearing had declined slightly from 28.7% at end-2014 to 27.7%. There were other improvements made too. As compared to the end of 2014, the REIT’s interest coverage ratio had stepped up slightly from 6.2 times to 6.3 and its average cost of debt had dropped from 3.32% to 2.99%.

CapitaLand Retail China Trust had also made moves to further protect itself from short-term interest rates hikes given that its percentage of fixed rate debt had increased slightly from 72.6% at end-2014 to 74.3% in the reporting quarter.

Business highlights

The REIT’s a retail mall owner. As such, statistics like shopper traffic and tenants’ sales can be good indicators of the health of its malls. In 2015, there was a slight 1.8% increase in footfall for the REIT’s portfolio of malls. As for the quarterly figures, shopper traffic had climbed by 1.0% year-on-year in the fourth-quarter, but fell by 6.6% compared to a year ago.

In terms of tenants’ sales, there was a healthy 11.6% increase for the whole of 2015.

CapitaLand Retail China Trust ended 2015 with a portfolio occupancy of 95.1%, down slightly from the 95.9% seen a year ago. Given that portfolio occupancy was at 98.2% in 2013, this might be a trend worth keeping an eye on.

Outlook ahead

In the earnings release, the REIT had had given a big picture update of the economic and retail scene in China. It wrote:

“China’s central bank forecasts the economy to grow at a lower rate of 6.8% in 2016 as it expects the industrial overcapacity and non-performing loans to reduce the effects of the stimulus measures.

Notwithstanding the slower economic growth, the Chinese government has reiterated its commitment to rebalance its economy by driving domestic consumption. This should augur well for [CapitaLand Retail China Trusts] shopping malls which are positioned as onestop family-oriented destinations for rising middle-income consumers.”

From the results, it seems like CapitaLand Retail China Trust is chugging along fine, though there are some slightly problematic areas to watch.

At yesterday’s close of S$1.43, the REIT is trading at a 20% discount to its latest net asset value and has a trailing distribution yield of 7.4%.

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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 Esjay does not own shares in any company mentioned.