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CapitaLand Mall Trust’s 2018 Second-Quarter Earnings: Distribution Per Unit Grows 2%

CapitaLand Mall Trust (SGX:C38U) is the first real estate investment trust (REIT) listed in Singapore. The REIT, which is also the largest retail REIT by market capitalisation, owns 15 shopping malls located here such as Tampines Mall, Junction 8, and IMM Building. CapitaLand Mall Trust also owns a 12.7% stake in CapitaLand Retail China Trust (SGX:AU8U), which mainly invests in shopping malls in China.

This morning, CapitaLand Mall Trust announced its financial results for the second quarter ended 30 June 2018. Here are some of the key takeaways.

Financial highlights

Gross revenue for the reporting quarter inched up 1.6% year-on-year to S$171.4 million. The increase in gross revenue was primarily due to higher gross rental income from Plaza Singapura, Bedok Mall, Bugis Junction and Tampines Mall, and higher other income. Lower occupancy and lower rental reversions from JCube and Bukit Panjang Plaza partially offset the increased gross revenue. Divestment of Sembawang Shopping Centre on 18 June 2018 also affected gross revenue.

Net property income grew 2.8% to S$120.8 million on the back of lower property operating expenses, which fell 1% year-on-year.

Distributable income to unitholders for the latest quarter came in at S$100 million, up 2.9% year-on-year, while distribution per unit (DPU) rose 2.2% to 2.81 Singapore cents. Exactly a year ago, DPU was 2.75 Singapore cents.

The REIT ended the reporting quarter with an adjusted net asset value per unit of S$1.99, up 4.2% from a year ago and 3.1% from 2018’s first quarter.

As of 30 June 2018, the REIT had an aggregate leverage ratio of 31.5%, down from 33.5% as of 31 March 2018. The net sale proceeds from the divestment of Sembawang Shopping Centre were used to repay existing borrowings, leading to the lower gearing in the latest quarter.

Operational highlights

For the first half of 2018, shopper traffic at the REIT’s malls tumbled 2.4% year-on-year while tenants’ sales dipped 0.2%. The figures exclude Funan, which was closed in July 2016 for redevelopment, and Sembawang Shopping Centre.

CapitaLand Mall Trust’s portfolio rental reversion was 0.8% while its tenant retention rate for the first half of 2018 was at a healthy 83.8%. The REIT’s portfolio occupancy, as of 30 June 2018, came in at 98%, higher than the market average of 92.5%.

To stay ahead of its competitors, CapitaLand Mall Trust started new offerings at Clarke Quay with Tsui Wah, a restaurant serving up Hong Kong food, and popular South Korean eatery, Isaac Toast, at Plaza Singapura. Other new concepts include BuyBye Valiram Fashion Outlet at IMM Building and NY Night Market at Westgate.

The REIT is also engaging shoppers with a wide range of marketing events such as Market on Wheels at Bugis Junction and Bugis+, and KouKou at Plaza Singapura. Amid the relatively soft retail market, it is commendable that CapitaLand Mall Trust is putting in considerable effort to stay ahead of the curve.

Looking ahead

Tony Tan, chief executive of the REIT’s manager, gave some updates on Westgate, commenting:

“We continually evaluate initiatives to strengthen the appeal of our malls through asset enhancement. For instance, to improve shopper circulation at Westgate, a new mall entrance has been created at Level 1 and a new set of escalators connecting Level 1 and 2 will be added. We will also put up air-conditioned enclosure to the outdoor refreshment areas to enhance diners’ comfort. We target to complete these enhancement works by 4Q 2018.”

The REIT’s manager added that it would continue to focus on sustaining CapitaLand Mall Trust’s DPU.

At the current price of S$2.16 per unit, the REIT is selling at an adjusted price-to-book ratio of 1.09 and a trailing distribution yield of 5.2%.

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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 and CapitaLand Retail China Trust. Motley Fool Singapore contributor Sudhan P owns units in CapitaLand Mall Trust.