CapitaLand Mall Trust’s Latest Earnings: Slight Growth in Distributions Seen

CapitaLand Mall Trust  (SGX: C38U) released its second-quarter earnings report this morning. The reporting period was from 1 April 2016 to 30 June 2016.

CapitaLand Mall Trust is Singapore’s first ever real estate investment trust. It currently has stakes in 16 shopping malls in Singapore including Raffles CityBedok MallPlaza Singapura, and Bugis Junction.

You can catch the results from the REIT’s previous quarter here.

Financial highlights

The following’s a rundown on some of CapitaLand Mall Trust’s latest financial figures:

  1. Gross revenue rose 7.1% year-on-year to $170.9 million in the reporting quarter.
  2. Net property income (NPI) followed suit with a 6% increase to S$116.1 million.
  3. Distribution per unit (DPU) for the quarter came in at 2.74 cents, a 1.1% increase from the 2.71 cents seen in the second-quarter of 2015.
  4. As of 30 June 2016, CapitaLand Mall Trust’s properties are collectively valued at S$10.0 billion (this includes only the REIT’s share in partially-owned properties). The REIT ended the second-quarter of 2016 with an adjusted net asset value per unit of $1.87, up 3.3% from a year ago.

Beyond these, investors may 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:

2016-07-22 CMT Debt Table Capitaland Mall Trust
Source: Capitaland Mall Trust’ Earnings Presentation

The REIT saw its gearing rise slightly to 35.3% in the latest quarter. But, it also reduced its average cost of debt to 3.2% and improved its interest cover ratio from 4.6 times to 5.0 times.

RCS Trust, which manages Raffles City, drew down $1,069.5 million from its loan facilities to refinance its 2016 debt obligations. The new loans have an average term to maturity of 3.5 years. CapitaLand Mall Trust has a 40% interest in RCS Trust. The REIT noted that it does not have any loans due in 2016.

Operational highlights

CapitaLand Mall Trust’s revenue benefited from the inclusion of Bedok Mall (acquired on October 2015) and higher revenue recorded after the AEIs (asset enhancement initiatives) at IMM BuildingTampines Mall, and Bukit Panjang Plaza were completed in 2015.

The revenue increases were offset by the sale of Rivervale Mall in December 2015 and lower revenue from Funan Digitalife Mall, which is winding down for closure.

CapitaLand Mall Trust ended the reporting quarter with a 97.9% portfolio occupancy rate, up from 96.4% a year ago. The REIT currently has a weighted average lease expiry (by gross rental income) of 2.1 years.

Meanwhile, the trust also reported that shopper traffic grew by 3.6% year-on-year in the second-quarter of 2016. This was accompanied by a 2.3% increase in tenants’ sales per square foot. These might be important data points to observe for CapitaLand Mall Trust as online shopping grows in prominence.

Wilson Tan, the chief executive of the REIT’s manager, had given some comments on CapitaLand Mall Trust’s performance in the earnings release:

“Despite a soft retail market, CMT [CapitaLand Mall Trust] continued to produce steady operational results in the first half of 2016.

Backed by our portfolio of well-located shopping malls and extensive network of retailers, CMT registered year-on-year increases of 3.6% and 2.3% in shopper traffic and tenants’ sales per square foot respectively. As at 30 June 2016, portfolio occupancy remained high at 97.9%.”

What’s next

Tan also gave the following outlook:

“Looking ahead, CMT will continue to delight shoppers by bringing together the best of lifestyle offerings in our malls, and support retailers by creating a conducive business environment for them to actively engage their customers.

Funan DigitaLife Mall, which closed from 1 July 2016, will embark on three years of redevelopment works to enhance its attractiveness as a lifestyle destination in the revitalised Civic and Cultural District.

Slated to be completed in the fourth quarter of 2019, the new integrated development will comprise retail, office and serviced residence components measuring approximately 887,000 square feet (sq ft) in total gross floor area, almost double its current size of approximately 482,000 sq ft. The redevelopment of Funan DigitaLife Mall is expected to achieve a return on investment of 6.5%.”

As Tan noted, Funan DigitaLife Mall will be shut-down for the next three years, starting from the next quarter. This will result in loss of rental income. Bedok Mall will have to pick up the slack here.

Capitaland Mall Trust’s units started trading at $2.20 when the market opened. This translates to a historical price-to-book ratio of 1.18 and a distribution yield of around 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.