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1 REIT That Has Outperformed The Market By Over 2X

Singapore’s Straits Times Index (SGX: ^STI) plays host to 30 of the largest companies in the Lion City. But one company has beaten the market’s returns by over two times in the last three years.

CapitaLand Commercial Trust (SGX: C61U) is the owner of nine premium commercial buildings in Singapore, and has delivered a solid 32% return over the last three years. In contrast, the broader market STI posted 14% in returns over the same period.

A Closer Look

Let’s have a look at CapitaLand Commercial Trust’s financials to see how it has been doing. We can start with its distributable income and distribution per unit.

 

Source: Capitaland Commercial Trust Presentation

Between 2004 and 2017, CapitaLand Commercial Trust has been growing its distributable income with a compound annual growth rate (CAGR) of 15.4%. The REIT’s distributable per unit (DPU) has been mostly increasing since 2009.

However, there was a dip in distribution per unit (DPU) for 2017. This decline is mainly due to the REIT raising capital through a rights issue. The purpose of this rights issue was to finance the REIT’s acquisition of Asia Square Tower 2. The total number of units increased as a result, and consequently, led to a decrease in DPU.

Next up, we take a look at the REIT’s debt profile. From the graph below, we can see that CapitaLand Commercial Trust had a well-spread out debt profile as of 30 June 2018. Debt refinancing for the current year has also been completed.

Source: Capitaland Commercial Trust Presentation

Overall, CapitaLand Commercial Trust has an aggregate leverage of 37.9% which is comfortably below the 45% regulatory limit for REITs. The REIT’s average term to maturity for its debt stands at 3.6 years with an average cost of debt at 2.8%. Meanwhile, 85% of the REIT’s borrowings are on fixed rate loans. All these stats suggest that the REIT is able to manage its future debt refinancing needs.

To close, let’s have a look at the REIT’s net asset value (NAV). The graph below shows that the REIT has been able to grow its NAV reliably over the past five years. Its NAV at the end of the first half of 2018 was even higher coming in at S$1.80.

To sum up, CapitaLand Commercial Trust has delivered a steady DPU over the last three years. Currently, the REIT has a market capitalisation of S$6.6 billion.

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The Motley Fool Singapore contributor Esjay contributed to this article. Esjay does not own any of the shares mentioned. 

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore has recommended shares of CapitaLand Commercial Trust. Motley Fool Singapore writer Chin Hui Leong does not own any of the shares mentioned.