CapitaLand Retail China Trust reports 2Q19 net property income rose 7 percent

The CapitaMall Wangjing mall in Beijing, part of the CapitaLand Retail China Trust portfolio. Credit: CapitaLand Retail China TrustThe CapitaMall Wangjing mall in Beijing, part of the CapitaLand Retail China Trust portfolio. Credit: CapitaLand Retail China Trust

CapitaLand Retail China Trust (CRCT) reported Wednesday its second quarter net property income rose 7.3 percent on-year to S$40.36 million on stronger rental growth and lower operating expenses.

“The increase was due to stronger rental growth from the multi-tenanted malls, offset mainly by lower revenue in CapitaMall Grand Canyon and CapitaMall Qibao,” CRCT said. “CapitaMall Grand Canyon’s revenue was lower due to frictional vacancy in the second quarter of 2019 while in CapitaMall Qibao, there was a one-off forfeiture of security deposit from pre-termination of leases in the second quarter of 2018.”

CapitaMall Wuhu was also closed and its divestment has been completed, CRCT added.

Gross revenue for the quarter ended 30 June was S$55.18 million, down 1.9 percent on-year, the trust said in a filing to SGX.

The distribution per unit (DPU) was 2.54 Singapore cents for the quarter, up 2 percent from 2.49 Singapore cents in the year-ago quarter, excluding a capital distribution from the year-ago divestment gain from CapitaMall Anzhen, CRCT said. Including the capital distribution, DPU fell 3.8 percent on-year from 2.64 Singapore cents in the year-ago quarter.

Daiwa had forecast net property income of S$39.4 million on revenue of S$56.4 million with a DPU of 2.6 Singapore cents.

In yuan terms, net property income for the quarter was 201.10 million yuan, up 11.5 percent on-year, while gross revenue was 274.92 million yuan, up 1.9 percent on-year, the filing said.

Property operating expenses for the quarter dropped 20.5 percent on-year to S$14.82 million, mainly on accounting changes which excluded land rental expenses, CRCT said.

CRCT said for the first half, rental reversions averaged 7.5 percent as shopper traffic and tenants’ sales both grew by 6.7 percent. Portfolio occupancy was at 97 percent as of end-June, it added.

“Despite global market headwinds and trade tensions, China’s economy registered steady growth at 6.2 percent for the second quarter of 2019, in line with market expectations,” Tan Tze Wooi, CEO of CapitaLand Retail China Trust Management (CRCTML), said in the statement.

“The continued rise in national urban disposable income per capita of 8.0 percent for the first half of 2019 indicates momentum in the increasing spending power of China’s middle class, a trend which CRCT malls are well-placed to benefit from,” he added.

Based on the unit closing price of S$1.60 Tuesday, the annualized distribution yield was 6.4 percent for the quarter, CRCT said.

For the first half, net property income rose 7.2 percent on-year to S$80.17 million on gross revenue of S$111.14 million, down 0.5 percent on-year, the filing said.

The DPU for the first half was 5.03 Singapore cents before the capital distribution, up 2.0 percent on-year from 4.93 Singapore cents, while including the capital distribution, it was 5.13 Singapore cents, down 4.8 percent on-year from 5.39 Singapore cents, the filing said.

In its outlook, CRCT pointed to recent fiscal stimulus measures from China’s government aimed at bolstering domestic consumption, including increasing infrastructure spending and implementing tax cuts.

“With its portfolio of strategically located malls in China, CRCT is well placed to benefit from this focus on domestic consumption,” the trust said.

CRCT owns and invests in 11 shopping malls in eight Chinese cities as of end-June, the filing said.


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