CapitaLand China Trust - DBS Research 2023-10-30: New Economy Assets Showing Slower Progress

• 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.

• - Read this at SGinvestors.io -

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.
• - Read this at SGinvestors.io -
• 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.

• Read more at SGinvestors.io.

Geraldine WONG DBS Group Research | Derek TAN DBS Research | https://www.dbs.com/insightsdirect/ 2023-10-30 SGinvestors.io

---