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

CapitaLand Commercial Trust (SGX: C61U) is a REIT with ownership (either full or partial) over 10 commercial properties in Singapore, which includes Capital TowerSix Battery RoadBugis VillageRaffles Cityand One George Street. It recently also proposed the acquisition of a Grade A commercial property in Germany.

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

Financial performance

Here’s a table showing a condensed income statement from CapitaLand Commercial Trust for the first quarter of 2018:


Source: CapitaLand Commercial Trust 2018 first quarter earnings update

We can see that CapitaLand Commercial Trust had a mixed quarter. Although gross revenue and net property income both showed strong growth, the REIT’s distribution per unit (DPU) had declined by 11.7% year-on-year.

CapitaLand Commercial Trust attributed the growth in its gross revenue and net property income to “higher income from CapitaGreen, Capital Tower and Six Battery Road, as well as a full quarter contribution from Asia Square Tower 2. This was offset by lower contributions arising from the divestments of One George Street (50.0% interest), Golden Shoe Car Park and Wilkie Edge in 2017.”

As at 31 March 2018, the REIT had a gearing ratio of 37.9% (which is getting a little close to the regulatory ceiling of 45%), and its occupancy rate stood at 97.3%.

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 42 REITs that are in Singapore’s stock market.


Source: SGX Stock Facts

We can see that CapitaLand Commercial Trust has a slightly lower PB ratio, but a much less attractive distribution yield (the lower a stock’s yield is, the higher is its valuation).

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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. The Motley Fool Singapore has a recommendation on CapitaLand Commercial Trust.