- CapitaLand China Trust (SGX:AU8U)'s 3Q23 gross revenue reported saw a 1.9% y-o-y decline to RMB478m and higher net property income of 1.2% y-o-y to RMB316m. In S$ terms, 3Q23 net property income declined by 8.4% y-o-y, with 9M23 net property income stacking up to ~S$188m, behind our full year estimates.
Performance continues to be led by retail segment, as expected.
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Flat reversions for both retail and new economy segments.
- Underlying retail drivers continues to show momentum from 1H23 numbers, which has seen a V-shaped recovery in both traffic footfall and tenant sales.
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- We estimate that retail reversions signed for the quarter were flat and boosted by AEI completions for the period, especially Rock Square mall and Grand Canyon mall. Occupancy rose 1ppt q-o-q to 97.8%.
Securing tenants early within business parks segment in a supply-heavy market.
- New leases in the quarter saw demand from the electronics and professional services segment.
- We estimate that reversions signed for the period were flat at 0.9%, following decent reversionary numbers in 1H23 at 3.9%. CapitaLand China Trust has secured about ~70% of lease expiries in 4Q23 by NLA.
- Business park occupancies on most assets were unchanged, while AIT (Ascendas Innovation Towers) and SG-HZ Science Park 1 saw a steepening of vacancies by 1.1- 4.3% q-o-q.
- Operational numbers continue to reflect sluggish sentiment within the new economy asset space, which is similar to other logistics S-REITs with China exposure. Hence portfolio vacancies within the new economy and logistics segments may not improve at this juncture, in our view.
- New economy segment which has been a pillar of support through the pandemic years, may now be a portfolio drag with NPI for the period flat y-o-y from a low base in 2022.
Capital structure has been supportive.
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