SINGAPORE (Oct 25): CapitaLand Retail China Trust on Monday posted its 3Q17 DPU increased 0.4% to 2.37 cents from 2.36 cents last year.
Gross revenue saw an increase of 10.5% to RMB 275.0 million from RMB 248.8 million in 3Q16. In Singapore dollar terms, this was a 10.6% increase to $56.0 million, compared to $50.6 million a year ago.
This was mainly due to the contribution from CapitaMall Xinnan, which was acquired on Sept 30, 2016, as well as rental growth from the other multi-tenanted malls.
However, revenue growth was partially offset by lower turnover from CapitaMall Qibao due to competitions faced in the vicinity and no contribution from CapitaMall Anzhen with effect from July 1.
See: CapitaLand Retail China Trust posts 0.4% rise in 3Q DPU of 2.37 cents
Following the announcement of the results, DBS has maintained its “buy” call on the trust with a higher target price of $1.80.
In a Tuesday report, analyst Mervin Song says the trust deserves to trade at a premium to its net asset per value (NAV) due to its high-quality assets with growth upside as well as acquisition potential.
According to the analyst, the divestment of CapitaMall Anzhen at a 13% premium to its latest valuation shows that it deserves to trade above it NAV.
The trust’s organic growth will be led by positive rental reversions at its key high-quality assets, such as CapitaMall Xizhimen and CapitaMall Wangjing, together with revamps at several malls such as Grand Canyon, Minzhongleyuan and Xinnan.
Meanwhile, the analyst believes that acquisition is on CRCT’s radar after the divestment of Anzhen which will bring inorganic growth.
“We believe the divestment of Anzhen is a signal of a shift in Manager’s focus from stability to growth generated from more actively managed assets and acquisition of such assets could be on the radar,” says Song.
On the other hand, Phillip Capital is maintaining its “neutral” rating on CRCT with a target price of $1.64.
CRCT has been shifting away from underperforming department stores into higher yielding trade sectors such as fashion and F&B.
Nonetheless, tenant sales are slowing down with 3Q17 seeing a 2.0% y-o-y decrease. This was apparent in the leisure (cinema) and supermarkets sectors.
Still, the trust's average cost of debt and gearing has remained stable at 2.42% and 35.4% respectively.
In a Tuesday report, analyst Dehong Tan says, “We expect flat DPU y-o-y for FY17e and a 5.1% increase for FY18e. Tenant sales should stabilise after falling the past two years as CRCT’s malls mature. Mall rejuvenations at CapitaMall Wangjing, Xinnan and Minzhongleyuan are expected to drive FY18 tenant sales and rental reversions.”
As at 10.05am, units in CRCT are trading at $1.66 or one time FY17 NAV.
