Latest Earnings From CapitaLand Retail China Trust: Growth In Distributions Seen

CapitaLand Retail China Trust (SGX: AU8U) had released its fiscal first-quarter earnings (for the three months ended 31 March 2016) yesterday evening.

The REIT is part of the sprawling Asian real estate giant CapitaLand Limited (SGX: C31). Currently, CapitaLand Retail China Trust owns 10 shopping malls in its portfolio. All of them are based in China and are spread across six cities.

With that, let’s have a look at the REIT’s latest results to understand how it’s doing.

Financial and operational highlights

Here are some important numbers:

  • Gross revenue for the first-quarter of 2016 rose 1.9% to S$55.5 million from S$54.5 million a year ago.
  • The REIT’s net property income climbed by 6.2% year-on-year to S$36.7 million. That helped the income available for distribution to a 4.5% increase to S$23.2 million.
  • Subsequently, the REIT’s distribution per unit (DPU) increased by 2.7% from 2.64 cents a year ago to 2.71 cents for the reporting quarter.

CapitaLand Retail China Trust’s 1.9% growth in gross revenue was mainly due to rental growth from its multi-tenanted malls. There was some drag seen at the CapitaMall Wuhu property due to ongoing tenancy adjustments there.

The REIT ended the first-quarter of 2016 with a portfolio-wide occupancy level of 94.6%, which is a small decline from the 95.1% seen a year ago. Meanwhile, it also has a weighted average lease expiry of 5.9 years by total rent income, which is again a step backward from the first-quarter of 2015 (there was a WALE of 6.6 years then).

There was a healthy positive rental reversion of 7.3% seen in CapitaLand Retail China Trust’s portfolio for the reporting quarter. But, that’s again lower than the number of 12.8% seen in the same period last year.

Tenant sales for CapitaLand Retail China Trust’s entire portfolio of malls had increased by 1.0% year-on-year while shopper traffic had stepped up by 1.4%.

Balance sheet highlights

Moving on to the trust’s debt profile, the gearing ratio stood at 28.7%, which was flat from a year ago. Meanwhile, the average cost of debt was at 3.04% and the average term to maturity stood at 2.61 years; both figures had grown since the first-quarter of 2015. Finally, CapitaLand Retail China Trust ended the reporting quarter with an interest coverage and net-debt-EBITDA-ratio of 6.4 and 5.3, respectively; both were unchanged from a year ago.

You can see all these changes and more in the table below:

CapitaLand Retail China Trust balance sheet
Source: CapitaLand Retail China Trust’s earnings presentation

CapitaLand Retail China Trust’s latest adjusted net asset value per unit stood at S$1.64, a slight increase from S$1.62 seen a year ago.

A future outlook

In the earnings release, Tony Tan, the chief executive of CapitaLand Retail China Trust’s manager, had the following comments on the improvements that the REIT’s making to its malls:

“We continued to refresh our malls and tenant mix to stay ahead of our shoppers’ increasingly sophisticated aspirations and needs. Chinese restaurant Jing Ge Steamboat opened at CapitaMall Xizhimen to positive response from diners. Citygarden, which specialises in Singaporean dishes, will also be opening to further diversify the mall’s food and beverage options. CapitaMall Qibao enhanced its fashion offerings with the introduction of trendy young women’s fashion brand Binkeke.”

To enhance the shopping experience, CapitaMall Saihan recently commenced façade upgrading, which is slated to be completed by the third quarter. Renovation works at CapitaMall Wangjing are also on track to unveil the mall’s refreshed outlook by June. Going forward, we will continue to strengthen the retail experience in our malls through asset enhancement initiatives and optimising the tenant mix.”

The REIT also mentioned that it is “well positioned to benefit from China’s transition to a consumption-driven economy.” CapitaLand Retail China Trust thinks that there has been progress in China’s reform efforts for its economy. To the point, China’s economy had grown by 6.9% in 2015, and consumption had “contributed 66.4% to its growth and service sector accounted for 50.5% of its GDP [gross domestic product].”

CapitaLand Retail China Trust’s units closed at S$1.46 yesterday. Based on its latest net asset value and trailing DPU, the trust had a price-to-book ratio of 0.89 and distribution yield of 7.3%.

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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 companies mentioned.