CapitaLand China Trust’s H2 DPU falls 12% to S$0.0264

THE manager of CapitaLand China Trust (CLCT) on Thursday (Feb 6) posted a 12 per cent decline in distribution per unit (DPU) to S$0.0264 for the second half ended Dec 31, from S$0.03 in the year-ago period.

This brings total DPU for FY2024 to S$0.0565, down 16.2 per cent year on year from S$0.0674, and was attributed to an enlarged unit base. Based on the closing price of S$0.73 per unit on Wednesday, CLCT’s distribution yield for the full year was 7.7 per cent.

The China-focused real estate investment trust posted a 6.5 per cent decrease in revenue for the half-year period to S$168.5 million from S$180.2 million, due to a weaker yuan against the Singapore dollar.

On a yuan basis, revenue fell 5.5 per cent year on year. The manager attributed this decline to lower revenue contributions from the business parks and logistics parks segments, owing to lower occupancy and rental rates. There was also an absence of contributions from CapitaMall Shuangjing, which was divested in January last year.

Additionally, there was a decline in revenue contribution from CapitaMall Xinnan due to lower average occupancy and gross rental rate resulting from rental adjustments and tenants remix. This was partially offset by improved performance in CapitaMall Grand Canyon, Rock Square and CapitaMall Yuhuating, which benefited from asset enhancement initiatives (AEIs).

Net property income (NPI) for the second half stood at S$108.6 million, down 7.6 per cent from S$117.5 million in the same period a year earlier.

The three malls that underwent AEIs in 2023, however, recorded a 13.7 per cent year-on-year increase in NPI.

Distributable income was down 10.3 per cent on the year to S$45.5 million from S$50.7 million. The distribution will be paid out on Mar 27, after the record date on Feb 14.

Natural hedging strategies

For the full year, distributable income fell 15 per cent year on year to S$96.8 million from S$113.9 million. Revenue was down 6.4 per cent to S$341.5 million from S$364.7 million previously, and NPI fell 8.2 per cent to S$226.6 million from S$246.7 million.

Gearing as at end-December stood at 41.9 per cent, up from 41.6 per cent as at end-September. Around 76 per cent of CLCT’s total debt is on fixed interest rates.

Gerry Chan, chief executive of the manager, said: “CLCT is well-positioned to capitalise on further interest rate reductions as the renminbi rate-easing cycle continues. This will effectively lower our overall cost of debt and enhance our natural hedging strategies.”

CLCT’s weighted average lease expiry stood at 1.9 years by gross rental income and 3.2 years by net lettable area.

Its retail portfolio achieved 98.2 per cent occupancy as at end-December – the same as the previous year – with the majority of its retail assets recording improved occupancy year on year.

The business park segment’s occupancy was 87.6 per cent, while the logistics park segment’s was 97.6 per cent as at end-December.

However, rental reversion for the three segments was impacted by subdued consumer spending in China.

The manager reported a negative rental reversion of 24.5 per cent for the logistics park segment. Rental reversions for CLCT’s retail and business park segments were also negative, at 1.1 per cent and 4.5 per cent respectively.

As at end-December, CLCT’s portfolio valuation declined 1.7 per cent on the year to about 24 billion yuan (S$4.4 billion).

“Within the retail sector, smaller and weaker assets faced greater downside pressure, while business parks and logistics parks were impacted by near-term supply-demand imbalances and a softer market outlook,” said the manager.

Chan pointed out that the trust will continue to monitor developments in geopolitics and international trade, as well as the impact of the Chinese government’s economic support measures.

“These factors will play a crucial role in shaping China’s ongoing recovery and CLCT’s performance.”

CLCT’s units closed 0.7 per cent or S$0.005 higher at S$0.73 on Wednesday.