CapitaLand Mall Trust’s Latest Earnings: Distribution Growth Seen, But What’s Next?

CapitaLand Mall Trust  (SGX: C38U) released its fiscal first-quarter earnings report last Friday evening. The reporting period was from 1 January 2016 to 31 March 2016.

CapitaLand Mall Trust is a real estate investment trust or REIT. Being a unitholder of a REIT gives you partial ownership to all the real estate that it owns. In the case of CapitaLand Mall Trust, it currently has stakes in 16 shopping malls in Singapore, including Raffles CityBedok MallPlaza Singapura, and Bugis Junction among others.

You can learn more about the REIT in here and here. You can also catch the results from the last quarter in here.

Financial highlights

The following’s a quick rundown on the latest financial figures for CapitaLand Mall Trust:

  1. Gross revenue rose 7.4% year-on-year to $179.8 million in the reporting quarter. The growth came from the inclusion of Bedok Mall (acquired in October 2015) which was offset by the sale of Rivervale Mall in December 2015.
  2. Net property income (NPI) followed suit with an 8.6% year-on-year increase. The reporting quarter’s NPI came in at $127.9 million compared to $117.7 million in the same quarter a year ago.
  3. Distribution per unit (DPU) for the quarter rose to 2.73 cents, a 1.9% increase from the 2.68 cents seen in the first-quarter in 2015.
  4. The REIT’s investment properties have an estimated value of $8.4 billion as of 31 March 2016. CapitaLand Mall Trust ended the reporting quarter with an adjusted net asset value per unit of $1.86, up 3.3% 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 Mall Trust below:

CapitaLand Mall Trust balance sheet (18 April)
Source: Capitaland Mall Trust’ Earnings Presentation

The REIT saw its gearing rise slightly over the past year to 35.5% in the reporting quarter. But on a brighter note, CapitaLand Mall Trust had increased its average term to maturity to 5.3 years while reducing its average cost of debt to 3.2%. The interest cover and net debt to EBITDA ratios had improved to 5.2 times and 5.8 times as well.

Business highlights and a future outlook

CapitaLand Mall Trust ended the reporting quarter with an overall portfolio occupancy rate of 97.7%, relatively unchanged from the previous quarter and a slight increase from a year ago. The REIT also  had a weighted average lease expiry (by gross rental income) of 2.0 years.

Elsewhere, CapitaLand Mall Trust also reported an increase in shopper traffic of 4.9% year-on-year and a 4.6% rise in tenant sales per square foot per month. These might be important data points to observe for investors in the likely event that online shopping grows in prominence in our society.

Wilson Tan, the chief executive of CapitaLand Mall Trust’s manager, had given the following comments in the earnings release touching on the REIT’s future pans to drive growth:

“CMT [CapitaLand Mall Trust] continues to build value for our unitholders through effective corporate governance, innovative asset enhancement initiatives and proactive capital management. We are continually looking for ways to stay ahead in the retail industry and enhance our strong portfolio of shopping malls in Singapore.

In the second half of this year, we will start the redevelopment of Funan DigitaLife Mall into a new-generation integrated development and leading lifestyle destination that befits its central location in the revitalised Civic and Cultural District.

In addition, we will continue to make progress with the asset enhancement initiatives for Plaza Singapura, Bukit Panjang Plaza and Tampines Mall, aimed at staying ahead of the evolving aspirations and needs of both our shoppers and tenants.”

Investors might want to note that Funan DigitalLife Mall has been earmarked for redevelopment in the second half of 2016 as Tan had stated. This will result in a loss of rental income from the mall. This is where the newly acquired Bedok Mall may help to pick up the slack.

CapitaLand Mall Trust commented in the earnings release that its portfolio of malls are “mostly well-connected to public transportation hubs and are strategically located either in areas with large population catchments or within Singapore’s popular shopping and tourist destinations.”

The REIT thinks that that these traits, along with the “large and diversified tenant base of the portfolio, will contribute to the stability and sustainability of the malls’ occupancy rates and rental revenues.”

CapitaLand Mall Trust’s units closed at S$2.17 last Friday. This translates to a historical price-to-book ratio of 1.17 and a trailing distribution yield of 5.2%.

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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.