The manager of CapitaLand China Trust (CLCT) has reported a distribution per unit (DPU) of 4.10 cents for the 1HFY2022 ended June.
The DPU is 3.1% lower than the DPU of 4.23 cents in the corresponding period the year before as the REIT manager has opted to retain $3.6 million of the distributable income to unitholders for “financial flexibility”.
The retained amount follows the recent lockdowns in Shanghai and the mandatory closures of shopping malls in China due to the resurgence of Covid-19.
For the 1HFY2022, CLCT’s distributable income increased by 12.9% y-o-y to $72.0 million. The amount includes rental support for the vacancy loss and rent free provided to existing tenants for Chengdu Shuangliu Logistics Park. The amount was previously deducted from the amount paid to the vendor.
If the full amount had been distributed, CLCT’s DPU for the 1HFY2022 would have increased by 2.1% y-o-y to 4.32 cents.
During the 1HFY2022, gross revenue increased by 12.7% y-o-y to $199.3 million, which includes the rental relief that has been extended to CLCT’s tenants due to the Covid-19 situation in China. The amount is also based on the average exchange rate of $1 to RMB4.718.
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The exchange rate represents a 3.1% difference to the exchange rate of $1 to RMB4.867 in the 1HFY2021.
Total property operating expenses increased by 5.68% y-o-y to $59.8 million.
Accordingly, net property income (NPI) stood at $139.5 million, up 15.9% y-o-y.
The increase in NPI was mainly due to the enlarged portfolio and strong contributions from CLCT’s business parks and logistics assets, partially offset by higher rental relief for retail tenants, says the REIT manager in its statement on July 26.
As at June 30, CLCT’s retail portfolio occupancy stood at 95.5%, 0.1 percentage points higher q-o-q. Its business parks and logistics assets stood at 94.7% and 97.0% respectively, which is “well-supported” by quality tenants in high growth sectors.
The REIT’s portfolio weighted average lease expiry (WALE) stood at 2.1 years by gross rental income (GRI) and 2.3 years by net lettable area (NLA).
The REIT’s net asset value (NAV) stood at $1.51 for the 1HFY2022.
Cash and cash equivalents as at June 30 stood at $297.5 million.
According to the REIT, about 71% of its total Singapore dollar (SGD)-denominated term loans is on fixed interest rates, which provides stability in interest expenses.
The REIT has also hedged some 77.1% of its undistributed income for the 1HFY2022 into Singapore dollars to mitigate the impact of foreign currency fluctuations.
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As at June 30, CLCT’s gearing stood at 38.6%, below the regulatory limit of 50%.
“China’s GDP expanded 2.5% y-o-y in 1HFY2022 and 0.4% y-o-y in 2QFY2022 amidst the country’s largest Covid-19 wave over the last two years, which triggered lockdowns across major cities in April and May. When business activities resumed in June, we began to see signs of normalcy returning to the market,” explains Tan Tze Wooi, CEO of the manager.
“With cities adopting more targeted containment measures and the government rolling out stimulus policies, we are cautiously optimistic that the operating environment in China will improve in 2HFY2022,” he says.
According to Tan, CLCT’s performance for the half-year period was “underpinned by our transformational pivot towards the resilient business parks and logistics asset classes, augmented by a rejuvenated retail portfolio”.
“Our proactive portfolio reconstitution in the last two years has positioned us well to reap the benefits of a diversified portfolio, and to capture the growth of China’s strong domestic consumption and innovation-based economies. With our healthy balance sheet and prudent capital management, we remain confident in seizing new opportunities to strengthen our overall portfolio quality and in delivering sustainable value to our unitholders,” he says.
He continues: “Extracting value from our portfolio of assets remains a key focus at CLCT. In preparation for the upturn, CLCT has been creating value in our retail portfolio through asset enhancement initiatives (AEIs).”
“CapitaMall Wangjing’s ongoing AEI to optimise about 14,000 square metres of space is on track to complete progressively from 3Q 2022, injecting more quality offerings while increasing rental income by more than 100%. About 1,860 square metres at CapitaMall Grand Canyon, previously occupied by a mini anchor tenant, will complete reconfiguration by 4QFY2022 to optimise the tenant mix with an expected return on investment of more than 40%.”
Unitholders will receive their DPUs on Sept 22.
Units in CLCT closed 1 cent higher or 0.87% up at $1.16 on July 25. Based on CLCT’s closing price of $1.16 on July 25, the annualised distribution yield for the half-year period was 7.1%.
