Capitaland Commercial Trust’s Latest Earnings: Distributions Are Up 10.1%, What’s Next?

CapitaLand Commercial Trust  (SGX:C61U) released its earnings results for the quarter and year ended 31 December 2016 this morning.

As a quick background, CapitaLand Commercial Trust, is managed by CapitaLand Limited (SGX: C31) and is one of the largest commercial real estate investment trusts (REITs) in Singapore by market capitalization.

At the local front, the REIT has ownership over properties such as Capital TowerSix Battery Road, and the Golden Shoe Car Park. It also has partial stakes in Raffles City Singapore and CapitaGreen and a 11% stake in Quill Capita Trust in Malaysia.

You can learn more about CapitaLand Commercial Trust in here and here. You can alsocatch up on the results from the REIT’s previous quarter here.

Financial Highlights

The following is a quick take on some of Capitaland Commercial Trust’s latest financial figures:

  1. Gross revenue was $89.7 million in the latest quarter, up 32.7% from the same quarter a year ago. For the full year, CapitaLand Commercial Trust’s gross revenue was up 9.3% to $298.6 million.
  2. Net property income (NPI) grew alongside its top-line, recording a 35.4% year-on-year increase to $70.8 million in the reporting quarter. For 2016, NPI was $231.3 million, an 8.7% increase from 2015.
  3. Distribution per unit (DPU) for the reporting quarter was 2.39 cents, a 10.1% increase from the 2.17 cents per unit reported in 2015’s fourth quarter. Capitaland Commercial Trust recorded a DPU of 9.08 cents for 2016, which represents 5.3% improvement from the year before.
  4. As of 31 December 2016, the REIT’s portfolio of investment properties were valued at $8.5 billion. The REIT reported an adjusted net asset value per unit of $1.73 at end-2016, unchanged from a year ago.

Beyond that, Foolish 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 Commercial Trust below:

2017-01-18 Capitaland Commercial Trust
Source: Capitaland Commercial Trust’s earnings presentations

As the table above shows, CapitaLand Commercial Trust’s debt load had increased by around $1 billion compared to a year ago.

As a result, the REIT’s aggregate leverage had increased from 29.5% to 37.8%. At the same time, its interest coverage had declined to 5.8 times while the average term to maturity had shortened to 3.2 years. CapitaLand Commercial Trust’s unencumbered assets also fell from 100% a year ago to 80% in the reporting quarter.

The majority of the REIT’s loans – 80% to be exact – are currently on fixed interest rates. Capitaland Commercial Trust has 11% of its loans coming due this year. Foolish investors might want to keep a watchful eye on its refinancing activities.

Operational highlights

CapitaLand Commercial Trust ended 2016 with a committed occupancy of 97.1%, unchanged from the end of 2015. The weighted average lease term to expiry was 6.6 years at the end of 2016.

Summing up the quarter, the REIT manager’s chief executive ,Lynette Leong, had the following comments:

“CCT’s portfolio committed occupancy rate of 97.1% as at 31 December 2016 is driven by expansion of existing tenants and take-up by new tenants. About half of 2017 leases have been renewed, and we will continue to proactively attract and retain tenants to mitigate leasing risk.

We do not expect to be significantly affected by rising interest rates given that about 80.0% of CCT’s borrowings are on fixed interest rates and that it has minimal debt due for refinancing in 2017.”

Leong also provided a brief outlook on CapitaLand Commercial Trust’s outlook:

“Beyond the current challenging market conditions, we are looking at the next wave of the office market upcycle as well as “the future of work” – that is, how the way people work will possibly evolve in the future given the trend of globalisation, mobility and digital technology – and incorporate that in our evaluation of the financial feasibility of the redevelopment of Golden Shoe Car Park, while seeking approvals from the government authorities.

Our wish is to replicate the success of CapitaGreen so as to spark a new growth catalyst for the Trust.”

CapitaLand Commercial Trust traded at $1.57 at the open today. This translates to a historical price-to-book ratio of 0.88 and a trailing distribution yield of 5.8%.

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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.