CAPITALAND RETAIL CHINA TRUST
AU8U.SI
CapitaLand Retail China Trust - Lowering our FV on softer CNY assumptions
- 3Q15 DPU grew 12.3% YoY
- Positive rental reversions of 10.9% in 3Q15
- Lower FV and maintain HOLD
3Q15 results met our expectations
- CapitaLand Retail China Trust (CRCT) reported its 3Q15 results which came in within our expectations. Gross revenue increased 7.5% YoY to S$55.3m due largely to a stronger CNY vis-à-vis the SGD, as gross revenue in CNY terms fell 0.7% to CNY251.8m.
- The latter was due to continued impact on CapitaMall Minzhongleyuan (MZLY) from a road closure to facilitate the construction of a subway line and ongoing weakness at CapitaMall Wuhu, but partially offset by rental growth in its other multi-tenanted malls.
- DPU grew 12.3% YoY to 2.64 S cents.
- For 9M15, CRCT’s gross revenue jumped 9.0% to S$164.1m and formed 76.3% of our FY15 forecast; while DPU of 8.01 S cents represented growth of 9.1% and constituted 75.4% of our full-year projection.
Operations largely still healthy
- Besides CapitaMall MZLY and CapitaMall Wuhu, CRCT’s other malls delivered positive YoY gross revenue and NPI growth in RMB terms in 3Q15.
- Overall portfolio committed occupancy remained stable at 94.8% (-0.2 ppt QoQ). Solid YoY tenants’ sales growth of 12.7% was recorded in 3Q15, while shopper traffic inched up 2.4%.
- Portfolio rental reversions came in at 10.9% in 3Q15, regaining some momentum as compared to 2Q15’s 4.6% rental uplift. This brings its 9M15 rental reversion figure to 8.9%.
- Nevertheless, we note that for the remainder of 2015, CapitaMall MZLY has 13.5% of its leases (as a percentage of the mall’s rental income) expiring.
- We believe this may exert a drag on CRCT’s rental reversions for 4Q15.
- In addition, we understand that a large tenant occupying 1,200 sqm of space has already indicated its intention to not renew its lease upon expiry in 4Q15.
Maintain HOLD
- As at 30 Sep 2015, CRCT had a healthy gearing ratio of 28.5%, with an average cost of debt of 2.98%. 74.0% of its total borrowings are fixed (83.7% if we exclude onshore RMB denominated loans).
- However, we are lowering our DDM-derived fair value estimate from S$1.64 to S$1.48 as we input lower CNY-SGD exchange rate assumptions in our model. Maintain HOLD.
Andy Wong Teck Ching CFA
OCBC Investment
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http://www.ocbcresearch.com/
2015-10-26
OCBC Investment
SGX Stock
Analyst Report
1.48
Down
1.64
