<Results Analysis> FY21 – New Economy assets storming ahead in recovery
- Full year DPU of 8.73 Scts (+38% y-o-y) ahead of estimates
- New Economy assets storm ahead in terms of recovery with forward reversions at c.5%, with a 4ppt uplift in business park occupancy
- Retail segment continues to see disruption with periodic mall closures, though FY21 rental rebates only a fraction of 2020 levels, which is a comfort
- Mouth-watering forward yields at >8%; strong rental growth visibility from new acquisition contributions
- Maintain BUY with unchanged TP of S$1.60
Results Summary
| Summary of results | 2H21 | 1H21 | %q-o-q | 2H20 | % y-o-y |
| Revenue | 201.1 | 176.9 | 14% | 109.0 | 84.5% |
| NPI | 130.1 | 120.3 | 8% | 69.9 | 86.1% |
| DI | 71.4 | 64.1 | 11% | 42.7 | 67.3% |
| DPU | 4.50 | 4.23 | 6% | 3.33 | 35.1% |
| Key Financial Metrics | 2H21 | 1H21 | %q-o-q | 2H20 | % y-o-y |
| Gearing | 37.70% | 35.9% | 1.8 ppt | 31.8% | 5.9 ppt |
| Average cost of debt | 2.62% | 2.57% | 0.1 ppt | 2.76% | -0.1 ppt |
| ICR | 4.9 | 4.40 | 0.50 | 3.7 | 1.20 |
| WADE (years) | 3.4 | 3.80 | -0.1 | 3.0 | 0.43 |
| Key Operational Data | 2H21 | 1H21 | %q-o-q | 2H20 | % y-o-y |
| Portfolio occupancies | |||||
| Retail Occupancy | 96.30% | 95.4% | 0.9 ppt | 94.1% | 2.2 ppt |
| BP Occupancy | 96.20% | 94.0% | 2.2 ppt | 92.30% | 3.9 ppt |
| Logistics Occupancy | 97.40% | n.a. | n.a. | n.a. | n.a. |
| Rental reversions (%) | |||||
| Retail Reversions | -3.40% | -2.1% | n.a. | -4.0% | – |
| BP Reversions | 7.0% | 6.7% | n.a. | – | |
| Logistics Reversions | 2.40% | n.a. | |||
| Portfolio WALE (GRI) | 2.2 | 2.3 | -0.10 | 2.4 | -0.20 |
Full year DPU at 8.73 Scts exceeds estimates on acquisition growth
- CRCT reported full year revenue and NPI of S$378.0m and S$250.4m, up 80% and 85% y-o-y.
- This was contributed by acquisitions made in 2021, including (i) full period contribution of CRCT’s business park portfolio, (ii) 100% stake in Rock Square, (iii) incremental rents from Nuohemule mall and (iv) the newly acquired 4 logistics assts.
- Distributable income rose 70% y-o-y to S$135.5m.
- Full year DPU rose 37.5% y-o-y to 8.73 Scts, exceeding our estimates at 8.51 Scts.
New Economy segment clocked in mid-single digit reversions
- Post CLCT’s first venture into the logistics space, exposure to New Economy segments on valuation terms increased to 21.9% within the portfolio, with 14.6% from Business Parks and 7.3% from Logistics Park.
- Steady ramp up in occupancy across both business park portfolio and logistics portfolio.
- Business park rental reversions continue to be strong at +7.0% (full year 2021), sustaining momentum from 1H reversions at 6.9% , while logistics reversions clocked in 2.4% this quarter.
- New leasing demand originated from the trade categories comprised of Electronics & Engineering, Bio-medical and E-commerce.
- Despite fears of supply chain impact from regulatory lockdown, tenants within the ‘New Economy’ space that saw any form of impact is minimal, and concentrated within domestic small-medium enterprises.
- Business Park occupancy continues to be leased above the respective submarket occupancies, steadily increasing from 92.3% as at end FY20 to end FY21 at 96.2%.
Retail segment continues to see slight hiccup in operations with 3 temporary mall closures
- Retail malls saw a total of 96 days of closure in 2H21 within 3 malls – CapitaMall Xuefu, Aidemengdun and Xinnan.
- Reversions still in the red zone, albeit marginally at -3.4%.
- Portfolio occupancy at 96.3%, a 40bps decline q-o-q, but has generally matched back to pre-COVID levels.
- Tenant sales rose 16.1% y-o-y, while shopper traffic rose 9.3% y-o-y, and stands at c.82% of pre-COVID levels on a portfolio basis.
- Rental rebates has eased to just about a quarter of 2020 levels (quantum of c.RMB150m), which we estimate to be c.0.3months worth of rebates, primarily to tenants that suffered from mall closures.
- Total retail portfolio valuation remains flat y-o-y at RMB 18,111m (vs 2020: RMB 18,110m).
Room for further value extraction within retail portfolio with chunky leases up for renewal
- c.14k sqm of retail space will be recovered from anchor department store at CapitaMall Wangjing.
- The c.20% of mall NLA on the first few floors of the mall with excellent mall frontage will be refreshed and optimised, with c.3% of AEI NLA secured.
- Exposure to department store exposure will be reduced from 15% to 0%.
- Moreover, we believe there will be room for further rejuvenation assets through divestment of non-core retail assets with smaller malls or lower-performing malls such as Aidemengdun mall and Grand Canyon potentially next on the divestment radar.
Robust capital management
- Gearing at a healthy 37.7%, with 77% of term loans on fixed interest rate.
- Both interest cover and average cost of debt remains flat q-o-q at 2.62% (3Q21: 2.59%) and 4.9x (3Q21: 4.8x).
- With just c.11% of debt expiring this year, CLCT expects interest rate to stay relatively flat going forward.