CapitaLand China Trust ((SG:AU8U)) has held its Q3 earnings call. Read on for the main highlights of the call.
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CapitaLand China Trust’s recent earnings call reflected a mixed sentiment, highlighting both achievements and challenges. Notable successes included the C-REIT listing and logistics revenue growth, while significant challenges were seen in revenue declines and occupancy rates, particularly in Business Parks. Despite positive developments in debt management and retail traffic, the overall revenue and NPI declines were concerning.
Successful C-REIT Listing
CapitaLand China Trust, along with its sponsor, successfully listed the C-REIT CLCR on the Shanghai Stock Exchange, marking a significant milestone as China’s first international sponsored retail C-REIT. The listing opened trading at 19.6% above its IPO price, with an impressive institutional oversubscription at 254 times and retail at 535 times, showcasing strong market interest.
Logistics Revenue Increase
The logistics sector saw a notable 13% increase in revenue quarter-on-quarter, primarily due to improved occupancy rates at Shanghai Fengxian. This growth highlights the potential of logistics as a key revenue driver for the company amidst other sector challenges.
Retail Sector Performance
The retail sector experienced positive growth, with a year-on-year increase in shopper traffic by 4.5% and tenant sales by 3.2%. Key sectors such as Food & Beverage, Infotech, Toys and Hobbies, and Jewelry and Watches showed significant growth, indicating a robust recovery in consumer spending.
Debt Management Achievements
CapitaLand China Trust made strides in debt management, reducing the average cost of debt from 3.42% to 3.36% and lowering gearing to 28.8% through the temporary use of perpetual proceeds. The company also achieved its target of 50% RMB-denominated debt, reflecting prudent financial management.
Golden Week Performance
During China’s Golden Week, CapitaLand China Trust reported a 4.6% year-on-year increase in traffic and a 4% increase in total sales, underscoring the resilience of the retail sector during peak shopping periods.
Decrease in Gross Revenue and NPI
The company faced a decrease in overall gross revenue and net property income (NPI) by 8% year-on-year, largely attributed to the divestment of CapitaMall Yuhuating. This decline highlights the impact of strategic divestments on short-term financial performance.
Business Parks Revenue Decline
Revenue from Business Parks dropped by 9.1% compared to the previous quarter, with occupancy challenges cited as a contributing factor. This decline points to ongoing challenges in maintaining occupancy and revenue in this sector.
Retail Reversion Rates
Retail reversion rates showed a negative trend at minus 1.5%, although this was an improvement from minus 3% in the first half. This indicates a gradual recovery in retail leasing conditions.
Occupancy Challenges in Business Parks
Overall occupancy in Business Parks dropped from 86.9% to 85.2%, with significant challenges in leasing vacated spaces. This highlights the ongoing difficulties in maintaining high occupancy levels in the Business Parks sector.
Forward-Looking Guidance
Looking ahead, CapitaLand China Trust aims to leverage its C-REIT structure to explore further retail investments and strategic divestments. Despite challenges, the company maintained a 5-star GRESB rating for sustainability. Retail revenue decline was narrower, and logistics revenue rose, driven by improved occupancy. The company also successfully refinanced SGD 150 million of perpetuals, indicating strong financial management.
In summary, CapitaLand China Trust’s earnings call presented a mixed sentiment with notable achievements in C-REIT listing and logistics growth, countered by challenges in revenue and occupancy rates. The company remains focused on strategic investments and sustainability, aiming to navigate through current challenges while capitalizing on growth opportunities.