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CapitaRetail China Trust: Bring on 2019

CapitaRetail China Trust ( SGX: AU8U) ended 2018 with a bang. All key operational figures in the final quarter of 2018 improved from a year ago. Most notably, despite a stronger Singapore dollar, distributable income and distribution per unit (DPU) still increased 7.7% and 2.1%, respectively.

The numbers:

Data source: CapitaRetail China Trust Q4 2018 Earnings Presentation. 1. Does not include the contribution from Rock Square as it is included in joint venture income on a separate accounting line.

What happened

In the last quarter, the growth in DPU was due to a contribution from the acquisition of a 51.0% stake in Rock Square and improved performance in its core multi-tenanted malls.

Over the course of the year, the contribution from Rock Square amounted to S$7.6 million, or 7.6% of total distributable income.

The improved DPU in Singapore dollar terms is more impressive when you consider that the Singapore dollar appreciated against the Chinese yuan by about 1.8% over the course of the year.

Financial position

  • Gearing as of 31 December stood at 35.4%
  • Interest cover was 5.3 times
  • Around 80% of debt is on a fixed rate
  • 80% of debt is hedged against Singapore dollars
  • Adjusted net asset value per unit is S$1.54

The trust has a healthy financial standing with around S$303 million in debt headroom. Its strong balance sheet gives it the flexibility to take on more debt for growth should an opportunity arise.

Portfolio stats

There were plenty of positives to take away from the company’s portfolio review. First, rent reversion in the quarter was positive 9.1% in its multi-tenanted malls. Out of the seven multi-tenanted malls, six recorded positive rental reversion rates. Rocksquare was again the outstanding performer with a rental reversion of 29.3%.

All of its multi-tenanted malls achieved higher revenue this quarter. The chart below shows the breakdown of revenue contribution from each of its malls compared to a year ago.


Data source: CapitaRetail China Trust Q4 2018 Earnings Presentation

Despite tenant sales dipping slightly by 0.5% during the quarter, shopper traffic on the same portfolio basis increased 3.2% in the fourth quarter of 2018. 

The final takeaway

All things considered, it was a good year for CapitaRetail China Trust. Despite foreign currency fluctuations going against it, the trust still managed to squeeze out higher DPU this year. On top of that, its financial flexibility for acquisitions and higher rental reversions, especially at Rock Square, should provide the trust with growth in 2019.

At the time of writing, units of CapitaRetail China Trust trade at S$1.51 each. This translates to a price-to-book ratio of 1 and a distribution yield of 6.75%.

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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 Jeremy Chia doesn’t own shares in any companies mentioned. The Motley Fool Singapore has a recommendation for CapitaRetail China Trust.