CapitaLand China Trust - OCBC Investment 2021-10-27: Increasing Exposure In New Economy Assets


CapitaLand China Trust - Increasing Exposure In New Economy Assets

  • Improved retail sentiment.
  • Foray into China’s logistics sector.
  • Increased exposure in new economy assets to 21.4% of asset value.

CapitaLand China Trust's 9M21 NPI grew 81.1% y-o-y

  • CapitaLand China Trust (SGX:AU8U)’s 9M21 NPI grew 81.1% y-o-y, driven by
    1. new contribution from addition of business parks,
    2. 100% ownership of Rock Square,
    3. improved retail performance, and
    4. lower rental reliefs granted.
  • Retail occupancy improved 1.3 ppt q-o-q to 96.7% while business park occupancy rate rose 2.7 ppt q-o-q to 96.7% in 3Q21.
  • We expect business park occupancy rates to remain strong, supported by 100% return to office community in China, demand and policy support for business parks.

9M21 tenants’ sales and shopper traffic recovered to 82% and 73% of pre-COVID-19 levels, respectively

  • CapitaLand China Trust’s tenants’ sales and shopper traffic improved 27.3% y-o-y and 22.6% y-o-y in 9M21, recovering to 82% and 73% of pre-COVID-19 levels respectively. The recovery was largely led by recovery in Beijing malls in 3Q21, but offset by weaker performances in non-Beijing malls due to resurgence of COVID-19 cases.
  • CapitaMall Xuefu was closed from 21 Sep to 5 Oct 2021 under the local government’s directives.
  • While the recovery of retail performance is dependent on the COVID-19 situations, the government’s effective containment of infections and faster recovery of reopened malls are likely to limit the risks of any resurgence of COVID-19.

Proposed acquisition of a portfolio of four logistics properties in China

ESG Updates for CapitaLand China Trust

  • CapitaLand China Trust’s social and governance scores rank below the industry average. As a CapitaLand-sponsored REIT, CapitaLand China Trust aligns its sustainability management approach with that of CapitaLand Limited.
  • While CapitaLand China Trust benefits from CapitaLand’s 2030 Sustainability Master Plan, there is a lack of broad measures for CapitaLand China Trust to reinforce its own environmental performance.
  • While CapitaLand China Trust undertook resource efficiency projects, e.g. installing LED lightings and water-efficient sanitary fittings at its malls, the REIT did not specify the scope of its green-certified properties.

OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2021-10-27
SGX Stock Analyst Report BUY MAINTAIN BUY 1.56 SAME 1.56