CAPITALAND RETAIL CHINA TRUST
AU8U.SI
CapitaLand Retail China Trust - Results Within Expectations
- 3Q DPU up 0.4% YoY.
- Catalyst at Wangjing.
- FV increases to S$1.61.
3Q17 results within expectations
- CapitaLand Retail China Trust's (CRCT) 3Q17 results were within expectations.
- 3Q17 revenue increased 10.6% YoY to S$56.0m, mainly due to new contribution from CapitaMall Xinnan which outweighed the divestment of CapitaMall Anzhen. Similarly, 3Q17 NPI increased 9.7% YoY to S$36.0m or 22.0% of our full-year forecast.
- 3Q17 DPU increased 0.4% YoY to 2.37 S cents or 22.0% of our initial full-year forecast (which includes an assumed capital distribution top-up from CRCT for the Anzhen divestment).
- 9M17 DPU came to 7.73 S cents or 72.2% of our full-year forecast. Without the assumption of this top-up, the 3Q17 DPU of 2.37 S cents would have made 22.8% of our full-year forecast.
Leasing demand strong for Wangjing Lvl 4
- Going forward, we expect greater contributions from CapitaMall Wangjing from 2Q18 onwards as the proportion of non-anchor NLA increases from 50% to 60%.
- On another note, contributions from CapitaMall Minzhongleyuan have been fairly volatile as it continues to undergo trade mix adjustments – with the asset clocking NPI of RMB 1.0m in 1Q17, RMB 2.5m in 2Q17, and RMB 0.3m in 3Q17. While the asset is relatively small, we had initially expected a more robust gain in contributions post the opening of the Zhongshan Avenue.
- We believe that these adjustments may take longer than we initially expected and make changes to our assumptions accordingly.
Maintain HOLD
- CRCT recorded a resilient portfolio occupancy of 95.6%, clocking a healthy rental reversion of 7.5% in 3Q17. We previously assumed that there will be a top-up from the Anzhen divestment proceeds for any lost income due to the disposal in FY17 and FY18, but have now adjusted our DPU forecasts to assume no top-up to be conservative.
- We expect more clarity on any potential capital distribution next quarter. We continue to be positive on CRCT’s long-term prospects, though current unit prices could be more compelling.
- According to the National Bureau of Statistics of China, China’s economy expanded 6.8% YoY in 3Q17 to RMB 59.3t while retail sales increased 10.4% YoY to RMB 26.3t.
- After rolling our estimates forward, our fair value estimate increases from S$1.59 to S$1.61.
- Maintain HOLD.
Deborah Ong
OCBC Investment
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http://www.ocbcresearch.com/
2017-10-24
OCBC Investment
SGX Stock
Analyst Report
1.61
Up
1.590
