CapitaLand China Trust - DBS Research 2022-07-27: Pushing Past The Lockdowns

CapitaLand China Trust 1H22 results highlight

Revenue top line in line with estimates; DPU trends behind post income retention of S$3.6m.

• CLCT announced 1H22 revenue of S$199.3m (+12.7% y-o-y) and NPI of S$139.5m (+16% y-o-y), in line with estimates.
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• Distributable income of S$72.3m (before retention) was up 12.8% y-o-y, but trails behind our estimates after factoring in income retention of S$3.6m for the period. DPU for 1H22 at 4.10 cents was marginally down y-o-y at 3.1%.
• Including income retained, 1H22 DPU at 4.32 cents was higher y-o-y at 2.1%.

Lockdowns took a toll on retail portfolio but troughed in the months of March; new economy portfolio continues to deliver strong reversions amidst uncertainty.

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• CapitaLand China Trust’s retail, business park, and logistics portfolios occupancies retreated 0.8ppt, 1.5ppt, and 0.4ppt, respectively h-o-h to land at 95.5%, 94.7%, and 97.0%.
• Approximately 0.5 months’ worth of rents were provided to retail tenants for this period, or 0.3 months’ worth on a portfolio basis. Negligible rental reversions were provided to new economy tenants. Retail portfolio continues to see marginally negative reversions at -2.8%, led by lower performing malls such as Qibao Mall.
• Consumer sentiment and retail spending took a toll amidst China’s lockdown, with CapitaLand China Trust’s shopper traffic and tenant sales witnessing a dip for the months of March to May. Tenant sales for 1Q22 trended up towards normalcy across the portfolio (at 90%-100% of pre-COVID levels), while 2Q22 numbers were impacted by ~200 days of mall closures amalgamated across the portfolio.
• 1H22 shopper traffic and tenant sales declined 21% and 13% y-o-y, respectively, which translates to ~58% and 73% of 2019 levels on a same-store basis.
• New economy segments delivered strong reversions amidst the lockdowns with the business park segment at 6.4% and logistics segment at 6.5%.

Ongoing asset rejuvenation efforts to pay off in FY23F in preparation for the upturn.

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Geraldine WONG DBS Group Research | Derek TAN DBS Research | https://www.dbs.com/insightsdirect/ 2022-07-27 SGinvestors.io

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