Capita Retail China Trust's 6.9% Yield Seems Convincing
Key Highlights:
CapitaLand Retail China Trust's 3Q19 DPU grew 1.2%
The annualised yield and price to book ratio are 6.9% and 1 respectively
1. Dividends
Net property income and distributable income grew 11.9% and 13.9% to $41.1m and $26.9m respectively. The increase was mainly due to:
Organic growth from existing malls
Additional contribution from the newly acquired CapitaMall Xuefu, CapitaMall Aidemengdun in Harbin and CapitaMall Yuhuating in Changsha
Realised FX gain of $4.7m
The annualised yield is 6.9%, which is at its historical average.
Source: reitscompass's REITs Insider ratings
2. Portfolio
Portfolio occupancy remains stable at 97.1%. While the REIT enjoyed positive rental reversion of 7.4% during the last quarter, 30.9% of its gross income will be up for renewal in 2020.
With the new acquisitions, portfolio leverage went up to 37.2%. The interest cost is 3%, the good news is downside risk is hedged with 82.6% of term loans are on fixed rates. Besides, the REIT also reckons the risk of currency fluctuation, and it has hedged 50% of its distributable income to SGD.
It is currently trading at a price to book ratio of 1.
3. Growth catalyst
Capital Retail China Trust's portfolio size is boosted by 17.1% to $3.8b with the three malls. The management is planning to reposition the malls with asset enhancement in the coming years, which would potentially contribute to future growth.
Summary
With a strong portfolio and well-positioned for future growth, Capita Retail China Trust remains as the key component stock in our portfolio.
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