CapitaLand China Trust - OCBC Investment 2023-07-28: Right Direction, Bumpy Road

• CapitaLand China Trust (SGX:AU8U)’s 1H23 results missed our expectations. Gross revenue and NPI both grew by 0.8% y-o-y in CNY terms to CNY947.8m and CNY663.7m respectively; however, due to the depreciation of CNY against S$, gross revenue and NPI both declined by 7.4% y-o-y to S$184.5m and S$129.2m respectively when translated to S$.
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• Due to the combination of foreign exchange fluctuations and higher interest costs, CapitaLand China Trust announced an 8.8% y-o-y decline in DPU from 4.10 Singapore cents in 1H22 to 3.74 Singapore cents in 1H23, making up 47.2% of our original FY23 DPU forecast. See CapitaLand China Trust's dividend date.
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Retail continues to be a bright spot…

• CapitaLand China Trust’s retail portfolio continued to see positive recovery momentum, with occupancy improving for the second consecutive quarter to reach 96.8% in 2Q23, and positive 1H23 rental reversion of 4.1%. Tenant sales grew 53.7% y-o-y in the second quarter, surpassing pre-COVID levels (up 3% versus 2Q19), while shopper traffic grew 57.8% y-o-y and 14.9% q-o-q.
• Occupancy costs are also healthier, having declined to pre-COVID levels of high teens to low-20%. Management expects an even stronger performance in 2H23, with the completion of asset enhancement initiatives (AEIs) at Rock Square and CapitaMall Grand Canyon due in 3Q23 and 4Q23 respectively.

… while new economy assets lagged

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Ada Lim OCBC Investment Research | https://www.iocbc.com/ 2023-07-28 SGinvestors.io

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