CapitaLand China Trust reports 30.2% lower H2 DPU of 3.33 S cents

GIVEN that CapitaLand China Trust's (CLCT) portfolio is "quite exposed" to the northern part of China, which has seen a resurgence in Covid-19 cases, Tan Tze Wooi, chief executive of the manager, said sentiment for CLCT remains "cautious".

During an earnings call on Friday morning to discuss its FY20 results, he said: "This northern sector seems to be taking a little bit more of those Covid cases, so we do see that our performance will be susceptible to some of this resurgence."

Mr Tan added that some of these cases were traced back to its malls, resulting in their tenants having to temporarily close in compliance with the authorities.

In H2 2020, particularly towards the fourth quarter, the recovery rate for CLCT's non-Beijing malls stood at close to 90 per cent for both traffic and sales. Meanwhile, recovery for its Beijing malls, which made up half of its FY20 net property income (NPI), lagged some five to 10 percentage points.

CLCT, the largest China-focused Singapore real estate investment trust (Reit) formerly known as CapitaLand Retail China Trust (CRCT), on Friday posted a distribution per unit (DPU) of 3.33 cents for the second half of the financial year ended December 2020.

Its name change from CRCT took effect from Thursday to reflect the trust's expanded investment mandate to include offices, business parks, logistic facilities, data centres and integrated developments.

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CLCT's manager is now known as CapitaLand China Trust Management.

The trust's latest H2 DPU represents a 30.2 per cent year-on-year decline from its H2 2019 DPU of 4.77 cents due to comparatively lower gross revenue, NPI and distributable income from the trust's 51 per cent interest in Guangzhou's Rock Square mall.

Distributable income for H2 2020 was 22.8 per cent lower at S$42.7 million compared to S$55.3 million the year before. It included the release of S$1.8 million of income retained in H1 2020, and S$1.8 million of compensation received by CapitaMall Erqi retained in FY 2019, said its manager in a pre-market filing on Friday.

Gross revenue for H2 2020 fell 15.9 per cent to 545.2 million yuan (S$112.4 million) from 648.1 million yuan the previous year.

The decrease was mainly due to the restructuring of some leases extended to selective tenants to tide through Covid-19, as well as the absence of CapitaMall Erqi's contribution following its divestment. Lower portfolio effective occupancy rate for the period due to tenancy adjustment downtime also contributed to the decline in overall gross revenue for the period.

In Singapore-dollar (SGD) terms, gross revenue declined 4.2 per cent to S$109 million from S$127 million a year ago as the SGD climbed against the yuan.

As such, NPI dropped 19.6 per cent to 349.6 million yuan from 435 million yuan in H2 2019. NPI fell 17.9 per cent to S$69.9 million from S$85.2 million a year ago in SGD terms.

The latest set of results brings CLCT's DPU for the full year ended December 2020 to 6.35 Singapore cents, which is 35.9 per cent lower than its 2019 DPU of 9.90 cents. NPI was S$135.2 million and distributable income was S$79.7 million, down 18.2 per cent and 25.2 per cent respectively from a year ago.

In the results filing, CLCT's manager said the trust's debt maturity remains well-staggered with about 80 per cent of its total term loans on fixed interest rates, which provides certainty of interest expenses. The trust has fully hedged its undistributed FY2020 income into SGD, it added.

As at end-2020, CLCT's gearing stood at 31.8 per cent, which its manager highlighted was well below the regulatory limit of 50 per cent.

Commenting on the trust's recent agreement to divest a number of its real estate assets in Wuhan, Mr Tan said the divestment proceeds will enhance CLCT's balance sheet and financial capacity to pursue accretive growth opportunities.

"We will continue to ride on the positive momentum to extract, unlock and create value from our enlarged portfolio. Plans include space reconfiguration in CapitaMall Yuhuating and redevelopment of the northern belt in Ascendas Xinsu portfolio," he said.

At the same time, Mr Tan noted during the call that following CLCT's mandate expansion, "we have been shown more interesting deal flows from different asset classes like logistics, and also further business parks from further markets". 

The trust is actively looking to complete the proposed acquisition of the five business parks in Suzhou, Xi'an and Hangzhou, and will continue to pursue acquisition-led growth.

Said Mr Tan: "Resiliency is (the) strategic pivot that we want to move our portfolio such that as the retail portfolio still has that volatility, (the business parks) come on board and give us that stability of core earnings, the resilience of the occupancy as well as the stability of the rent growth."

Units of CLCT closed at S$1.38 on Friday on a cum-distribution basis, down S$0.04 or 2.8 per cent.