CapitaLand China Trust Review @ 4 August 2022

Basic Profile & Key Statistics

• Main Sector(s): Retail, Office & Logistics
• Country(s) with Assets: China
  
• No. of Properties (exclude development/associate/fund): 20

Key Indicators

Performance Highlight

Gross revenue, NPI, distributable income and DPU before retention improved yoy mainly due to the full half-year contribution from the 5 business parks and 4 logistics parks, which were acquired in 2021.

Rental Reversion

Rental reversion for 1H 2022 is at -2.8% for retail and +6.4% for business parks & logistics parks.

Shopper Traffic & Tenant Sales

Both shopper traffic and tenant sales have declined in 1H 2022 due to stringent COVID-19 measures in April and May. The good thing is, the situation improved in June.

Asset Enhancement Initiatives

AEI for CapitaMall Wangjing is expected to be completed by 3Q 2022, of which is expected to increase the rent by more than 100%. As for AEI of CapitaMall Grand Canyon, it is expected to be completed by 4Q 2022.

Sensitivity to Interest Rate

For every 0.1% increase in interest, the impact would be S$ 0.5 mil, never mentioning whether the impact goes to gross revenue or distribution. Assuming it is referring to distribution, the DPU impact is 0.4% per annum.

Related Parties Shareholding

• REIT sponsor's shareholding: Above median for more than 20%
• REIT manager's shareholding: Above median for more than 20%
• Directors of REIT manager's shareholding: Below median for more than 20%

Lease Profile

• Occupancy: ± 5% from median
• All income is received in RMB
• WALE: Below median for more than 20%
• Highest lease expiry within 5 years: Above median for more than 20%; Falls in 2023
• Weighted average land lease expiry: Below median for more than 20%

Debt Profile

• Gearing ratio: ± 10% from median
• Gearing ratio including perps: ± 10% from median
• Cost of debt: ± 10% from median
• Fixed rate debt %: ± 10% from median
• Unsecured debt %: ± 10% from median
• WADM: ± 10% from median
• Highest debt maturity within 5 years: Below median for more than 20%; Falls in 2023
• Interest coverage ratio: Above median for more than 10%

Diversification Profile

• Top geographical contribution: Below median for more than 20%
• Top property contribution: Below median for more than 20%
• Top 5 properties' contribution: ± 10% from median
• Top tenant contribution: Below median for more than 20%
• Top 10 tenants' contribution: Below median for more than 20%

Key Financial Metrics

• Property yield: ± 10% from median
• Management fees over distribution: ± 10% from median; $6.29 distribution for every dollar paid 
• Distribution on capital: Below median for more than 10%
• Distribution margin: Below median for more than 20%

Trends

• Flat: Occupancy
• Slight Downtrend: NAV per Unit
• Downtrend: DPU, Interest Coverage Ratio, Property Yield, Distribution on Capital, Distribution Margin

Relative Valuation

• P/NAV - Average for 1y; Below average for 3y; Below -1SD for 5y
• Dividend Yield - Average for 1y; Above +1SD for 3y & 5y

Author's Opinion

Favorable	Less Favorable
Diversified Sector	Low Directors of REIT Manager's Shareholding
High REIT Sponsor's Shareholding	All income is received in RMB
High REIT Manager's Shareholding	Short WALE
Well Spread Debt Maturity	Concentrated Lease Expiry
High Interest Coverage Ratio	Short Weighted Average Land Lease Expiry
Low Top Geographical Contribution	Low Distribution on Capital
Low Top Property Contribution	Low Distribution Margin
Low Top Tenant & Top 10 Tenants Contributions	DPU Downtrend
	Interest Coverage Ratio Downtrend
	Property Yield Downtrend
	Distribution on Capital Downtrend
	Distribution Margin Downtrend

The retail sector is impacted by COVID-19 resurgence wave in April and May. Fortunately, all malls have re-opened on 1st June and both traffic and sales have improved. 

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*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee accuracy, completeness, and reliability. It should not be taken as financial advice or a statement of fact. I shall not be held liable for errors, omissions and loss or damage as a result of the use of the material in this blog. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.