Excerpts from OCBC Investment Research report
CapitaLand China Trust (SGX: AU8U)
- Rental reversion for the Retail portfolio turned positive to 4.9%
- 9M22 shopper traffic and tenants’ sales recovered to 61% and 77% of pre-Covid levels
- Performance of the New Economy portfolio remained resilient
Retail segment: sequential recovery in 3Q22 led by Beijing malls
Capitaland China Trust (CLCT)’s retail segment showed sequential improvement in 3Q22 after the lockdowns in 2Q22 which saw the largest impact to the portfolio since the onset of Covid-19.
Shopper traffic and tenants’ sales improved sequentially by 37.5% and 33.7% QoQ respectively in 3Q22. For 9M22, shopper traffic and tenants’ sales recovered to 61% and 77% of pre-Covid levels.
As of 30 Sep 2022, portfolio occupancy for CLCT’s retail segment dipped marginally by 0.4 percentage points (ppt) to 96.7%. Retail portfolio posted its first positive rental reversion of 4.9% since the start of Covid-19, boosted by the completion of CapitaMall Wangjing’s AEI.
However, excluding the impact of CapitaMall Wangjing, retail sentiment remains soft.
CapitaLand China Trust positive rental reversions of 5.6% for New Economy portfolio
As of 30 Sep 2022, rental reversions came in at 5.6% for CLCT’s New Economy portfolio. Occupancy rate of business parks and logistics portfolio fell slightly by 0.4ppt QoQ to 94.3% and 96.6% respectively.
Occupancy rate of business parks dipped slightly by 0.4 ppt QoQ to 94.3%. On the other hand, logistics park occupancy grew marginally by
0.2 ppt QoQ to 97.6%.
Overall, performance of the New Economy portfolio (~30% by rental income) remained resilient.
CapitaLand China Trust valuation/recommendation
Fair value estimate of SGD1.13. As of 30 Sep 2022, gearing stood at 39.3% with 71% of CLCT’s debt hedged on fixed rate. We lower our DPU estimates for FY22-26 by 5-6% mainly on higher interest rate assumptions while increasing our risk-free rate to 3.5%.
We also lower beta and terminal growth rate assumptions due to weaker economic outlook. Correspondingly, our fair value estimate decreases from SGD1.30 to SGD1.13
You can find the full report here and the company website here