8 Quick Things Investors Should Learn About CapitaLand Mall Trust From Its Management

CapitaLand Mall Trust (SGX: C38U) is one of the cool companies and trusts in Singapore’s stock market that shares webcasts and/or transcripts of their earnings presentations.

In late July this year, CapitaLand Mall Trust released its results for the second-quarter and first-half of 2016. I had spent time going through the webcast of CapitaLand Mall Trust’s earnings presentation and noted down eight things that may interest investors.

As a quick back ground, CapitaLand Mall Trust is Singapore’s oldest real estate investment trust. The REIT focuses on retail properties in Singapore and has 16 properties in its portfolio. It has stakes in popular spots such as Raffles CityPlaza Singapura, and Bugis Junction.

With that, here are my notes:

  1. Wilson Tan, the chief executive of the REIT’s manager, kicked off the presentation by reviewing the REIT’s operating performance. CapitaLand Mall Trust was able to eke out a 1.7% positive rental reversion on the back of 391 new leases or renewals. The REIT also saw a 3.6% increase in footfall at its malls for the quarter while its tenants saw a 2.3% uplift in sales. CapitaLand Mall Trust also reported a near-98% occupancy rate.
  2. Tan also highlighted two major developments. One, Funan DigitalLife Mall had closed its doors at the end of June and will be redeveloped. Two, CapitaLand Mall Trust became more unencumbered after the refinancing of loans related to Raffles City Singapore. Tan said that this strengthened the REIT’s financial flexibility. The remaining mall that has encumbered loans is Westgate, which CapitaLand Mall Trust owns a 30% stake in.
  3. Revenue for the first-half of 2016 was up 7.3% mainly due to the acquisition of Bedok Mall and asset enhancement initiatives at Tampines Mall and IMM Building.
  4. Tan also said that CapitaLand Mall Trust does not have any outstanding borrowings coming due in 2016. The REIT also issued fixed-rate notes of HK$560 million and S$150 million with a loan tenure of 10 years and 15 years, respectively.
  5. Speaking of debt, Tan said that CapitaLand Mall Trust had an aggregate leverage of 35.3% and maintained its average cost of debt at 3.2%. Tan also said that the average term to maturity of the REIT’s borrowings was five years.
  6. Tan said that the REIT’s portfolio of malls enjoyed a 2.3% increase in footfall in the first-half of 2016. He expects the higher footfall to remain for the year. Tenant sales were also up 2.3% for the first-half of 2016. Tan said that tenant sales at the music and video, and toys and hobbies categories were weak for the quarter, but noted that this accounted for only 1% of total gross tenant sales for the first-half of 2016.
  7. Tan also showed a slide on CapitaLand Mall Trust’s rental reversions from 2007 up till the first-half of 2016. He said that the positive rental reversions demonstrated the resilience of the malls in CapitaLand Mall Trust’s portfolio. But, investors may want to note that reversions for the first-half of the year (at 1.7%) has slowed considerably when compared to 2015 (3.7%) and 2014 (6.1%).
  8. Tan also shared details about the redevelopment of Funan DigitalLife Mall. He said that demolition work will start in the current quarter. The redevelopment is expected to take three years, and is expected to be completed in the fourth-quarter of 2019. Tan said that the estimated cost for the redevelopment will be S$560 million and the projected return on investment was 6.5%. Tan added that CapitaLand Mall Trust has the debt headroom to finance the redevelopment.

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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.