Capitaland Commercial Trust DPU Fell 25 Percent In 1Q2020

CapitaGreen

Capitaland Commercial Trust had released their 1Q2020 financial results on 29th April 2020.

Gross revenue increased by 3.8% to S$103.6 million. This was largely attributed to contributions from Main Airport Center which was acquired in September 2019 as well as higher revenue at 21 Collyer Quay, Gallileo and CapitaGreen.

Property operating expenses increased by 16.6% from S$20 million in 1Q2019 to S$23.3 million in 1Q2020. This was due to the addition of Main Airport Center and Bugis Village’s rental payable under the master lease with SLA.

Similar to other REITs, Capitaland Commercial Trust is also retaining capital due to uncertainty caused by the COVID-19 pandemic. This had caused the distributable amount to decrease by 23% as compared to 1Q2019.

A Distribution Per Unit (“DPU”) of 1.65 cents was declared. This is a decline of 25% as compared to 2.20 cents paid out in 1Q2019.

1Q2020 Financial Results

1Q2020
(S$’mil)
1Q2019
(S$’mil)
YoY(%)
Gross Revenue103.699.83.8%
Net Property Income80.379.80.7%
Distributable Amount (Before Capital Retention)70.282.7(15.2)%
Distributable Amount (After Capital Retention)63.782.7(23.0)%
Distribution Per Unit (“DPU”) (cents)1.652.20(25.0)%

Occupancy

The total portfolio occupancy for Singapore and Germany stood at 95.2%.

CapitaGreen’s lower occupancy was due to the downsizing of a tenant pre-COVID-19.

Six Battery Road’s occupancy decline due to expiry of Standard Chartered’s lease in January 2020 and start of asset enhancement initiative.

Raffles City’s office occupancy is at 92.2% due to downsizing of a tenant with lease expiring after 31 December 2019, while retail occupancy is at 98.5%.

Debt

Gearing ratio stood at 35.5% with S$600 million green loans obtained. This increased the percentage of sustainability funding.

Current Dividend Yield

Based on a total of 8.88 cents paid out in 2019 and the current share price of S$1.54, this translate to a current dividend yield of 5.77%. This is slightly unattractive to me as I am expecting office REITs to have a dividend yield of above 6%.

Since the dividend for 1Q2020 is cut, I believe the estimated yield is even lower than the current.

Summary

I like Capitaland Commercial Trust for its quality Grade A office assets. The current dividend falls below my expectations as I will expect an office REIT to provide a dividend yield of 6% or more. If I were to buy into Capitaland Commercial Trust, I will wait for the share price to decline further before buying.

If you are not aware, Capitaland Commercial Trust is merging with Capitaland Mall Trust. Since I already own Capitaland Mall Trust, I am less interested to buy into Capitaland Commercial Trust.

You can read more on the merger between Capitaland Commercial Trust and Capitaland Mall Trust here.

 

Screening For Dividend Stocks In April 2020

Last month, the stock market had crashed due to the impact of COVID-19. Since then, the stock market has started its recovery when news of government from different countries started to provide stimulus budget to revive the economy. During the crisis, I have picked up OCBC Bank, Singtel, US Manulife REIT and added more of CapitaMall Trust when their stock prices fell. If you didn’t know, I am a dividend investor. Thus, I usually look out for stocks with attractive dividend yield that provides me with endless dividends many years ahead. The stock market crash has provided me with such an opportunity.

I will run the Stocks Café stock screener every month which gives me a list of stocks that fulfill my dividend criteria. I fall into the medium risk type of investor and thus I never looked at stocks with dividend yield more than 10%. Below are the criteria that I used to identify dividend stocks.

  • Current Yield (%) >= 5 and <= 10
  • Price / Earnings <=20
  • Price / Book <= 3
  • Market Capitalization >= 1B

Below are the top dividend yielding stocks as of 10th April 2020. I believe you will see some REITs that you have been eyeing for before the stock market had crashed. Even though the stock prices have started the recovery, the current yield is still attractive.

NameCurrent Yield %P/EP/BMarket Cap
Mapletree NAC Trust9.9814.440.6112.8B
OUE Commercial REIT8.71113.380.6182B
Ascendas-iTrust8.6445.291.0841.4B
DBS7.8377.650.99848.7B
Frasers Logistics and Industrial Trust7.5689.050.9742.1B
CapitaRetail China Trust7.5578.460.8451.6B
Frasers Commercial Trust7.3857.910.7941.2B
Suntec REIT7.379.210.6053.6B
CapitaMall Trust7.1258.890.7986.2B
Ascendas REIT7.03817.71.2910.1B
Yanlord Land6.7332.970.3582B
ComfortDelgro6.52712.251.2523.2B
Frasers Centrepoint Trust6.2759.410.872.2B
UOB6.1977.740.84933.4B
SIA Engineering6.1810.441.292B
CapitaCommercial Trust6.08212.770.7845.6B
SPH REIT6.08111.840.7862.1B
TCIL HK$6.04417.20.3293.7B
SATS5.93815.92.2113.6B
OCBC Bank5.9227.910.86339.4B
Jardine Cycle & Carriage5.8336.710.8758.1B
Mapletree Commercial Trust5.5955.450.9555.6B
Yangzijiang Ship Building5.4355.90.6013.6B
Guocoland5.3855.720.3741.4B
Olam International5.2089.010.8524.6B
SPH5.19512.190.722.5B
Frasers Property5.1287.320.4533.4B
Lonza5.0425.720.6595.9B

Last, I just want to mention again that the above list is for reference only and we should do our homework before buying into the stock simply for the dividend yield.

CapitaLand Mall Trust and CapitaLand Commercial Trust Proposed Merger

Following the proposed merger between Frasers Logistics and Industrial Trust and Frasers Commercial Trust, another REIT announced their merger. On 22nd January 2020, CapitaLand Mall Trust and CapitaLand Commercial Trust announced their proposed merger.

CapitaMall Trust currently has 15 properties in its portfolio while Capita Commercial Trust has 10 properties. With the proposed merger, the merged REIT will have a total of 24 properties. (Capita Commercial Trust has 60.0% of Raffles City while CapitaMall Trust owns the other 40%)

With the merger, the properties are valued at S$22.9 billion.

With the proposed merger, CapitaLand Commercial Trust holders will receive

  • 0.72 CapitaMall Trust Units per CapitaLand Commercial Trust unit
  • S$0.2590 in cash per CapitaLand Commercial Trust unit

Pro Forma DPU Accretion

CapitaMall Trust currently makes up 9% of my stock portfolio. I currently do not hold any CapitaLand Commercial Trust units thus I will not receive any new CapitaMall Trust units or receive any cash distribution.

However, as a CapitaMall Trust unit holder, I will be keen to know what is the increase in Distribution Per Unit (DPU) after the merger.

According to the presentation slides, Pro forma DPU accretion is expected to increase 1.6% from 11.97 cents to 12.17 cents.

With every announced proposed merger, I noticed the share price has always gone up the next day. The share price of CapitaMall Trust has jumped from S$2.58 to S$2.64.

The share price of CapitaLand Commercial Trust has jumped from S$2.12 to S$2.18.

Past Merger of REITs

Here are the news on the merger of other REITs.

Which is the next REIT that will announce a merger?