10 Highlights from CapitaLand Retail China Trust 1Q 2018 Results

CapitaLand Retail China Trust (SGX:AU8U) is the first Singapore-listed REIT to invest in shopping malls in China. It currently has a portfolio of 11 malls including its most recent acquisition of Rock Square in Guangzhou. Last week, the REIT released its results for the first quarter of 2018. Here are 10 highlights from its earnings update.

  1. Gross revenue for the quarter declined 8.1% to RMB267.4 million. Net property income dropped 7.8% to RMB179.6 million. But more importantly, distributable income increased to S$26.7 million and distributions per unit inched up 0.4% to 2.75 Singapore cents.

2. The lower revenue was due to loss of revenue contribution from CapitaMall Anzhen, which was divested. Distributable income growth was driven by income contribution from its 51% interest in Rock Square. Notably, the income contribution from Rock Square did not contribute to gross revenue as it is accounted for as a joint venture.

3. The trust had total assets valued at S$2.99 billion and borrowings of S$998 million. That equates to a low gearing ratio 32.5%, well below the regulatory limit of 45%.

4. The average cost of debt was 2.51% and the average term to maturity stood at 2.54 years. Interest cover was a comfortable 6.3 times. Notably the REIT had no refinancing needs in 2018 and had 80% of its borrowings on fixed rates.

5. The adjusted net asset value per unit increased 2.5% to S$1.64 from S$1.59 on 31 December 2017.

6. Portfolio occupancy at the end of the reporting period was 94.9%. One of its malls- CapitaMall Wuhu is in transition for partial closure. Excluding that mall, portfolio occupancy would have been 97.8% instead.

7. During the quarter, the REIT had a strong rental reversion rate of positive 12.8%. The weighted average lease to expiry (WALE) was 2.8 years by rental income, with 28.1% of leases due later this year.

8. Another big positive for the REIT is that its portfolio shopper traffic and monthly tenant sales grew 7.7% and 2.1% respectively from the same period a year ago.

9. Going forward, the REIT’s management said that the REIT is well placed to capitalise on the rising consumption in China. It is also in the process of embracing new retail trends to integrate online-and-offline concepts and will continue to see acquisition opportunities in the future.

10. As of 27 April, the REIT was trading at S$1.56 per unit. This translates to a price-to-book ratio of 0.951 and an attractive annualised distribution yield of 7.05%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has a recommendation on CapitaRetail China Trust. Motley Fool Singapore contributor Jeremy Chia doesn’t own shares in any companies mentioned.