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What Investors Should Know About CapitaLand Commercial Trust’s Latest Earnings and Valuation

CapitaLand Commercial Trust (SGX: C61U) is one of the largest commercial real estate investment trusts (REITs) in Singapore by market capitalization. The REIT has ownership (either partial or full stakes) over properties mainly in Singapore, such as Capital TowerSix Battery RoadBugis VillageRaffles City Singapore and more.

There are two things about CapitaLand Commercial Trust that investors may want to know about right now: Its latest financial performance and valuation.

Financial performance

Here’s a table showing important items from CapitaLand Commercial Trust’s income statement for the second quarters of 2017 and 2016:


Source: CapitaLand Commercial Trust 2017 second quarter earnings presentation

We can see that the REIT had turned in a good quarter, with growth seen in its gross revenue, net property income, distributable income, and adjusted distribution per unit (DPU). The positive performance was driven mainly by CapitaGreen, which was fully acquired by CapitaLand Commercial Trust in August 2016.

The REIT’s occupancy rate was marginally lower in the second quarter of 2017 (97.6%) as compared to the first quarter  of the year (97.8%). But, the REIT’s occupancy rate is still ahead of the market’s 94.1%.

CapitaLand Mall Trust’s gearing has also improved sequentially, dropping from 38.1% to 36.0%. 85% of the trust’s total debt have fixed interest rates.

Valuation

There are two useful valuation metrics for assessing REITs. They are the price-to-book (PB) ratio, and the distribution yield.

The table below shows CapitaLand Commercial Trust’s PB ratio and distribution yield. It also shows the respective averages for the two valuation metrics for the 39 REITs that are in Singapore’s stock market.


Source: SGX.com Sock Facts; data as of 1 October 2017

Although CapitaLand Commercial Trust’s PB ratio is lower than the market average, its distribution yield is significantly lower. The REIT thus can be said to be trading at a premium to the market.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.