3 Things CapitaLand Commercial Trust’s Management Wants You To Know About Its Business

In late January, CapitaLand Commercial Trust (SGX: C61U) released its 2017 fourth quarter and full year earnings update. As a quick introduction, CapitaLand Commercial Trust has ownership (either full or partial) over 10 commercial properties in Singapore, which includes Capital Tower, Six Battery Road, Bugis Village, Raffles City and One George Street.

The Manager of CapitaLand Commercial Trust had given a presentation on the REIT’s latest results. In the presentation deck, I saw three slides on the REIT’s business that I think investors should pay attention to.

The first slide shows a high-level summary of CapitaLand Commercial Trust’s income statement for 2017:

Source: CapitaLand Commercial Trust 2017 fourth quarter earnings presentation

We can see that the REIT had a mixed year. Even though there was growth in gross revenue, net property income, and distributable income, CapitaLand Commercial Trust’s DPU declined.

The REIT’s higher gross revenue and net property income were due to higher contributions from CapitaGreen (there was 12 months of contributions from the property in 2017, compared to just four months in 2016) and new contributions from Asia Square Tower 2 (acquired in November 2017). These were offset by the sale of One George Street (a 50% stake) and Wilkie Edge.

A rights issue was the culprit for the lower DPU. Adjusted for the rights issue, CapitaLand Commercial Trust’s DPU in 2017 would have been up by 5% compared to 2016.

The next slide I want to look at shows the occupancy rates for the REIT’s portfolio, and the office market, going back to 2004:

Source: CapitaLand Commercial Trust 2017 fourth quarter earnings presentation

One thing that really stands out from the chart above is that CapitaLand Commercial Trust’s occupancy rate (the red line) has consistently outperformed the market-average (the green line). Another noteworthy point is that the REIT’s occupancy rate has easily been over 90% over the years. Given these data points, I think that CapitaLand Commercial Trust holds high-quality properties that are in high demand.

The last slide I want to talk about illustrates the breakdown of the REIT’s committed monthly gross rental income (as of 31 December 2017) by the trade mix of its tenants:

Source: CapitaLand Commercial Trust 2017 fourth quarter earnings presentation

We can see that banking, the largest trade group for CapitaLand Commercial Trust, accounted for 19% of its rent. This is followed by financial services at 13% and energy, commodities, maritime, and logistics at 10%. Together, these three trade groups accounted for 42% of the REIT’s rental income.

I think that this level of concentration is still reasonable, and the diversity in CapitaLand Commercial Trust’s trade mix should provide some stability in its rental income over the long run.

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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.