CapitaLand China Trust (SGX:AU8U) delivered a broadly stable 1Q26 operational update with headline revenue and NPI declines caused largely by the divestment of CapitaMall Yuhuating. Gross revenue fell 5.3% y-o-y to RMB416.4mil and NPI declined 3.5% y-o-y to RMB282.4mil.
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Performance by asset class.
Retail tenant sales rose 5.5% y-o-y and shopper traffic increased 3.3% y-o-y, supported by AEIs and new supermarket contributions. Leasing metrics were mixed. Retail occupancy remained high at 97.0% on -2.1% reversions, neutralised by new positive AEI reversions.
Business park occupancy was 86.0% (and above the respective submarket average) with reversion at -11.3%.
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On capital management, cost of debt declined to 3.10% while leverage edged up q-o-q to 41.4%.
Our views.
The near-term outlook appears stable, with retail anchoring performance through improving shopper traffic and tenant sales, which rose +5.5% y-o-y in 1Q26, driven by tenant refresh initiatives and anchor store reconfiguration. Encouragingly, occupancy remains broadly unchanged despite known negative rental reversion (retail: -0.2ppt q-o-q, business parks: -0.7ppt, logistics: +0.9ppt), indicating resilient underlying demand even as pricing power lags.
Logistics parks are also showing early signs of a rent bottom, with reversions improving from -24.5% in FY25 to -1.4% in 1Q26 following proactive leasing. Overall performance came in line with our neutral view. We continue to watch for a clearer inflection point, which may take longer to materialise given geopolitical tensions, inflation uncertainty and muted leasing sentiment.
Business parks remain the key drag, and we expect earnings to rely on retail AEI completions and leasing execution rather than broad-based rental growth, although lower debt costs should provide some support.
Maintain HOLD.
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Above is an excerpt from a report by DBS Group Research. Clients of DBS may access the full PDF report @ https://www.dbs.com/insightsdirect/.
