CapitaLand Retail China Trust’s Latest Earnings: What Investors Need to Know

Earlier this morning, CapitaLand Retail China Trust  (SGX: AU8U) released its earnings report for the quarter and year ended 1 October 2016 to 31 December 2016.

As a quick background, CapitaLand Retail China Trust is the first China-focused shopping mall real estate investment trust in Singapore. The REIT currently has 11 Chinese shopping malls in its portfolio. These properties are located in different parts of China, including major cities such as Shanghai, Beijing and Chengdu.

You can catch up on the results from its previous quarter here.

Financial highlights

The following is a quick take on some of CapitaLand Retail China Trust’s latest financial figures:

  1. Gross revenue was $56.7 million in the latest quarter, up 0.8% from the same quarter the year before. For the full year, CapitaLand Retail China Trust’s gross revenue was down 2.7% to $214.4 million.
  2. On average, China’s renminbi declined against the Singapore dollar by 7.2% in the fourth quarter of 2016. For the the full year, the renminbi declined by 4.6% against the Singapore dollar.
  3. Net property income (NPI) fell by 1.5% year-on-year to $34.8 million in the reporting quarter. For the entire 2016, NPI was $139.7 million, representing a 1% decline from 2015.
  4. Distribution per unit (DPU) for the reporting quarter was 2.37 cents, some 8.5% lower than the 2.59 cents reported in 2015’s fourth quarter. CapitaLand Retail China Trust recorded a DPU of 10.05 cents for 2016, which is a 5.2% decline from 2015.
  5. As of 31 December 2016, the REIT’s investment properties are collectively valued at $2.8 billion. The REIT ended 2016 with an adjusted net asset value per unit of $1.60, down 7% from the $1.72 recorded at end-2015.

Beyond these, 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. The table below shows CapitaLand Retail China Trust’s current and year-ago debt profile:

2017-01-26 CapitaLand Retail China Trust Debt Table
Source: CapitaLand Retail China Trust’s earnings presentations

CapitaLand Retail China Trust’s gearing has increased to 35.3% over the past year as total borrowings stepped up to $979 million. The REIT had taken on additional debt for the acquisition of Galleria at Chengdu. The mall has been renamed as CapitaMall Xinnan.

Only 53.7% of the REIT’s total debt are currently on fixed rates. This compares with end-2015, when 74.3% of its debt were on fixed rates.

CapitaLand Retail China Trust has a big lug of debt which will be coming due this year. Foolish investors may want to keep a watchful eye on the REIT’s refinancing activity.

Operational highlights and a future outlook

CapitaLand Retail China Trust ended 2016 with a committed occupancy of 95.9%, a slight increase from 2015’s 95.1%. The REIT saw its portfolio’s shopper traffic dip by 1.5% in 2016. The good thing is average monthly sales had increased by 3.1% during the year.

Victor Liew, the chairman of the REIT’s manager, had the following comments to share on China’s retail environment and the REIT’s position in the market:

“China’s economic growth of 6.7% in 2016 was within the target set by the Chinese government. Retail sales recorded a healthy year-on year increase of 10.4% to RMB 33.2 trillion, while annual urban disposable income and expenditure per capita lifted by 5.6% and 5.7% year-on-year respectively. China is now growing from a bigger base at a rate that is still considerably faster than those of most other economies.

We remain positive that CRCT’s [CapitaLand China Retail Trust] portfolio of family-oriented shopping malls will continue to benefit from China’s growing urban population and rising retail sales.”

CapitaLand China Retail Trust’s units opened trading at $1.42 today. This translates to a historical price-to-book ratio of 0.89 and a trailing distribution yield of 7.1%.

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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 does not own shares in any companies mentioned.