MENU

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

In late April, CapitaLand Retail China Trust (SGX: AU8U) released its 2018 first quarter earnings update. As a quick introduction, CapitaLand Retail China Trust is a Singapore-listed REIT that owns shopping malls in China.

The Manager of CapitaLand Retail China 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 the REIT’s income statement for the first quarter of 2018:


Source: CapitaLand Retail China Trust 2018 earnings presentation

We can see that the REIT delivered a mixed performance in 2018’s first quarter. Gross revenue and net property income both came in lower compared to a year ago, but the distribution per unit (DPU) was marginally higher. The sale of CapitaMall Anzhen by the REIT on 1 July 2017, and lower revenue from CapitaMall Grand Canyon, were the big culprits for the gross revenue decline.

The next slide I want to discuss shows a breakdown of the REIT’s occupancy rate by property:


Source: CapitaLand Retail China Trust 2018 earnings presentation

The occupancy rate is an important data point to study because it gives us clues about the strength of the demand for a REIT’s properties.

We can observe that CapitaLand Retail China Trust’s portfolio occupancy rate as of 31 March 2018 was lower both on a year-on-year as well as sequential basis. In fact, the REIT’s occupancy rate has been trending downwards in the last few quarters, mainly driven by the low occupancy rates in the malls under stabilization.

The last slide I want to talk about shows CapitaLand Retail China Trust’s lease expiry profile:


Source: CapitaLand Retail China Trust 2018 earnings presentation

The lease expiry profile is an important thing to study for a REIT as it gives us clues on how stable the REIT’s rental income may be.

There are two positive points worth highlighting about CapitaLand Retail China Trust’s lease expiry profile. Firstly, the REIT had ended 2018’s first quarter with a reasonably long (for retail standards) weighted average lease to expiry of 2.8 years by rental income. Secondly, the REIT has a staggered lease expiry profile, and this staggered nature should provide some rental income visibility for the REIT in the next few years. Moreover, the arrangement reduces the pressure on the REIT to renew a large chunk of its leases in any particular year.

How We Made an 88% Return in Just 19 Months!

Members of David Kuo's personal investing club Stock Advisor Gold were recently rewarded with the biggest winner Motley Fool Singapore has seen to date In a special, 100% FREE report we've put together, we take you behind the scenes to show you exactly how we first uncovered this stock... every article and piece of research we released on it... and what ultimately led to our decision to SELL for an 88% gain. Click here to claim your copy now!

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. The Motley Fool Singapore has a recommendation on CapitaLand Retail China Trust