• 2H21/FY21 DPU grew 35.1%/37.5% YoY
• Improvement in shopper traffic and tenants’ sales
• Stronger performance from new economy portfolio
In-line set of results – CapitaLand China Trust’s (CLCT) revenue rose 84.5% YoY to SGD201.1m while NPI increased 86.1% YoY to SGD130.1m in 2H21, mainly driven by additional contributions from CLCT’s new acquisitions. CLCT provided rental relief of ~0.3 months equivalent of gross rental income to its retail tenants in FY21 (1.3 months in FY20). CLCT 2H21 DPU was up 35.1% YoY to 4.50 S cents while FY21 DPU grew 37.5% to 8.73 S cents or 99% of full year forecast, in line with our expectations.
Retail portfolio occupancy rate at 96.3%; rental reversions at -3.4% – As at 31 Dec 2021, retail portfolio occupancy remained healthy at 96.3% (- 0.4 ppt QoQ). Shopper traffic and tenants’ sales improved 9.3% and 16.1% YoY in FY21. Management noted tenants’ sales have recovered to ~80% of pre-Covid-19 levels with sales at some of its stronger performing malls such as Xizhimen and Rock Square recovered to closer to 90%. Rental reversions for the retail portfolio came in at -3.4% (- 2.1% in 1H21). We expect rental reversions to remain under pressure in FY22 due to soft leasing momentum.
Income resilience from new economy portfolio – Performance of CLCT’s new economy portfolio remained resilient in 2H21. As at 31 Dec 2021, occupancy rate of business park (BP) and logistics park portfolio was at 96.2% and 97.4% respectively. In terms of rental reversions in FY21, BP and logistics park portfolio registered positive rental reversions of 7.0% and 2.7% respectively, benefiting from strong demand and policy support. Management expects rental reversions to remain positive for FY22 (BP: mid 4-5%; Logistics: 3%). After adjustments, we lower our fair value estimate from SGD1.56 to SGD1.50.
ESG Updates
CLCT’s social and governance scores rank below the industry average. As a CapitaLand-sponsored REIT, CapitaLand China Trust (CLCT) aligns its sustainability management approach with that of CapitaLand Limited. While CLCT benefits from CapitaLand’s 2030 Sustainability Master Plan, Research indicated a lack of broad measures for CLCT to reinforce its own environmental performance. While CLCT undertook resource efficiency projects, e.g. installing LED lightings and water-efficient sanitary fittings at its malls, the REIT did not specify the scope of its green-certified properties. BUY. (Chu Peng)