CapitaLand Retail China Trust 3Q18 net property income rose on rental growth, cost management

China yuan coins

CapitaLand Retail China Trust, or CRCT, reported on Tuesday that its third quarter net property income rose 2.2 percent on-year in Singapore dollar terms to S$36.73 million on a combination of rental growth and cost management.

In yuan terms, net property income rose 3.0 percent on-year in the quarter ended 30 September to 181.86 million yuan, it said in a filing to SGX after the market close on Tuesday.

Gross revenue fell 1.1 percent on-year in the quarter to S$55.35 million, while in yuan terms, it fell 0.3 percent on-year to 274.01 million yuan, it said.

The decline was mainly on the closure of CapitaMall Wuhu after the exit of its anchor tenant and from the restriction of trading activity in CapitaMall Grand Canyon’s atrium, it said, adding that was partially offset by higher revenue from CapitaMall Xizhimen and CapitaMall Wangjing.

The distribution per unit (DPU) for the quarter rose 1.7 percent on-year to 2.41 Singapore cents from 2.22 Singapore cents in the year-ago quarter, CRCT’s manager said. The third-quarter DPU was based on 980.5 million units, while the year-ago quarter’s was based on 901.8 million units, it said.

For the third quarter, excluding CapitaMall Wuhu, portfolio occupancy was at 97.7 percent, which the trust manager called “healthy,” while rental reversions were “robust” at 12.1 percent, the filing said.

The total property operating expenses fell to S$18.62 million in the quarter, down 7.1 percent on-year from S$20.04 million in the year-ago quarter, it said.

Its net realized foreign exchange loss was S$235,000, up from S$32,000 in the year-ago quarter, it said.

For the nine-month period, net property income fell 4.0 percent on-year to S$111.55 million, while gross revenue declined 4.6 percent on-year to S$167.0 million, CRCT’s manager said. The DPU was 7.80 Singapore cents for the nine-month period, up 0.9 percent on-year from 7.73 Singapore cents in the year-ago period, the filing said.

Tan Tze Wooi, CEO of CRCT’s manager, CapitaLand Retail China Trust Management Ltd. (CRCTML), pointed to a 9.3 percent on-year rise in China’s retail sales for the first nine months of 2018.

“China is now growing from a larger base and its long term fundamentals remain strong. With our quality portfolio of malls offering holistic lifestyle experiences, CRCT will stand to benefit from China’s improving household income and rising consumer aspirations,” Tan said.

“CRCT’s strong financial position will enable us to pursue acquisition opportunities to drive new growth while we continue with our active asset management strategy of extracting more value from existing properties,” Tan added.

To mitigate foreign-currency fluctuations, the trust’s manager has hedged around 80 percent of CRCT’s distributable income into Singapore dollars as of 30 September, the statement said.

CRCT has a portfolio of 11 shopping malls in eight cities in China, with the properties positioned as one-stop and family-oriented shopping, dining and entertainment locations.

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