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Breaking Down CapitaLand Mall Trust’s 2018 First Quarter Results

CapitaLand Mall Trust (SGX:C38U) is the first real estate investment trust listed in Singapore. It specialises in investing in shopping malls in Singapore and currently has 16 properties in its portfolio. In April, the REIT announced its financial results for the first quarter of 2018. Here is a quick recap on the positives and negatives of its latest earnings update.

The bright side

Perhaps the most obvious positive aspect of the REIT’s latest quarter results is the strong headline numbers. Distributable income climbed 2.1% year-on-year to S$99.0 million while distribution per unit increased 1.8% to 2.78 cents.

The management cited higher occupancy rates and lower marketing and utilities expenses as reasons for the improved numbers. Overall, there was broad-based growth in net property income earned from all of its properties except for its joint venture in Westgate.

During the quarter, the trust also managed to lower its gearing ratio from 34.2%, on 31 December 2017, to 33.5%, on 31 March 2018. The gearing ratio is a measure of the REIT’s debt against its asset base. The lower the gearing ratio, the less debt the trust has in relation to its asset base, which gives it more debt headroom room to fund future acquisitions. CapitaLand Mall Trust’s adjusted net asset value per unit also rose 0.5% in the quarter to S$1.93.

Lastly, the trust inked a total of 211 renewals or new leases during the quarter at an average rental reversion rate of positive 0.8%. This is a reversal from the negative rental reversions seen in 2017.

The not-so-bright side

There were a few trends over the last quarter that suggest that despite the positives, there may still be some challenges ahead.

First, shopper traffic again declined 2.1% from a year ago. This is a trend that has persisted from one year back. In 2017, shopper traffic for CapitaLand Mall Trust’s entire portfolio dipped 0.7%. The emergence of online retailers, food delivery and new shopping malls may have contributed to this decline.

Tenant sales per square foot for the month, likewise, declined 0.2% year-on-year. Among the trade categories that faced declines in sales were the food & beverage and supermarket categories, which saw a dip of 1.0% and 0.2% respectively.

Finally, the trust’s portfolio occupancy declined by 0.3 percentage points to 98.9%. This may affect the trust’s profitability going forward.

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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 recommended units of CapitaLand Mall Trust. Motley Fool Singapore contributor Jeremy Chia does not own shares in any companies mentioned.