CapitaLand Integrated Commercial Trust 1Q2021 Update

CapitaLand Integrated Commercial Trust

CapitaLand Integrated Commercial Trust has released its 1Q2021 business update on 26th April 2021. The trust is formed after the merger between CapitaMall and CapitaLand Commercial Trust was approved on 29th September 2020.

Gross revenue increased by 63.9% Y-o-Y to S$334.8 million. Net Property Income (NPI) also increased by 66.6% Y-o-Y to S$247.1 million.

If we look at the gross revenue breakdown, the retail segment performed poorly as compared to the previous quarter.

CapitaLand Integrated Commercial Trust Retail Performance 1Q2021

Below is the Gross Revenue and Net Property Income contribution from the office segment.

CapitaLand Integrated Commercial Trust Office Performance 1Q2021

The combined performance shows that the office segment pulled up the overall financial results.

CapitaLand Integrated Development Performance 1Q2021

Occupancy

Overall portfolio occupancy stood at 95.9%. Portfolio Weighted Average Lease Expiry by Gross Rental Income stood at 3.1 years.

The retail portfolio occupancy stood at 97.1%.

CapitaLand Integrated Commercial Trust Retail Occupancy 1Q2021

As you can see from the chart above, the closure of Robinsons have some form of impact on Raffles City Singapore. Occupancy fell from 98.5% in 2020 to a low of 90.9% as of 31st March 2021. When I last visited the mall, the vacated space by Robinsons have yet to be taken up.

Clarke Quay’s occupancy was affected by government-stipulated restrictions on trading hours and sales of alcohol at nightlife venues like clubs, karaoke joints and bars without food licenses. I guess this was worsen by the measure the government put in place during the COVID-19 pandemic lock down.

The overall office portfolio occupancy stood at 94.9%. With the exception of Six Battery Road, the rest of the offices occupancy rate looks healthy to me.

CapitaLand Integrated Commercial Trust Office Occupancy 1Q2021

Six Battery Road’s occupancy expected to remain as such until partial upgrading is completed in phases.

Debt

As of 31st March 2021, the gearing ratio stood at 40.8%. This was a slight increase as compared to the gearing ratio of 40.6% as of 31st December 2020.

After the merger, 95.8% CapitaLand Integrated Commercial Trust’s assets are unencumbered. Gone are the days whereby 100% of CapitaMall Trust’s assets are unencumbered.

Average term to maturity stood at 4.4 years.

CapitaLand Integrated Commercial Trust Debt Maturity 1Q2021

Current Dividend Yield

Based on the current share price of 2.20 cents and 2020 distribution payout of 6.95 cents, this translate to a current dividend yield of 3.159%.

Not advisable for dividend investors to buy at this price due to the non-attractive yield unless you believe the trust will increase its DPU payout moving forward.

CapitaLand Integrated Commercial Trust Share Price 28 Apr 2021

Summary

Based on the business updates, we can see that the retail segment has yet to recover from the impact of the COVID-19 pandemic. With the progressive rollout of the COVID-19 vaccination and the relaxation of government rules, we can see shoppers returning to the malls.

Following Phase 3 reopening on 28 Dec 2020, shopper traffic recovery gained momentum
while tenants’ sales rebounded in 1Q 2021. This is good news for retail REITs.

CapitaLand Integrated Commercial Trust Shopper Traffic 1Q2021

The only hesitation to buy into CICT is the dividend yield which is non attractive at the current share price.

CapitaMall Trust 3Q2020 Financial Results

CapitaMall Trust

CapitaMall Trust 3Q2020 Financial Results have been released on 22nd October 2020. CapitaMall Trust makes up 9.70% of my stock portfolio. During the stock market crash, I have added more of CapitaMall Trust given my confidence in CapitaMall Trust.

How is CapitaMall Trust coping with the COVID-19 recovery? Let us take a look at the latest 3Q2020 financial results.

In 3Q 2020, CapitaMall Trust’s Gross Revenue and Net Property Income (“NPI”) decreased by 25.3% and 27.6% year-on-year respectively. This was mainly due to rental waivers of S$29.5 million granted by CapitaMall Trust to tenants affected by COVID-19, as well as lower other income and rental on gross turnover.

CapitaMall Trust also released S$36.4 million, part of the S$46.4 million of taxable income available for distribution retained in 1H 2020 to Unitholders. In 3Q 2019, CapitaMall Trust released S$1.5 million of its taxable income available for distribution retained in 1H 2019 to Unitholders.

In terms of operational performance, rental reversion fell 4.4%. Shopper traffic declined much as 40.4%. With less shopper traffic, it is inevitable that tenant sales per square foot fell 13.9%.

CapitaMall Trust 3Q2020 Financial Results

3Q2020
(S$’000)
3Q2019
(S$’000)
YoY(%)
Gross Revenue 150,277 201,111 (25.3)
Net Property Income 104,449 144,222 (27.6)
Distributable Amount 114,294 112,973 1.2
Distribution Per Unit (“DPU”) (cents) 3.10 3.06 1.3

Occupancy

As of 30th September 2020, the average portfolio occupancy stood healthy at 98.0%.

CapitaMall Trust Occupancy 3Q 2020

Debt

As of 30th September 2020, the gearing ratio stood at 34.4%. 100% of CapitaMall Trust’s assets remain unencumbered.

Current Dividend Yield

Based on the historical payout of 11.97 cents in FY19 and current share price of S$1.89, this translates to a current dividend yield of 6.33%.

Year to date September 2020, DPU of 6.06 cents have been paid as compared to 8.86 cents (YTD September 2019). Investors should expect the FY20 full year DPU to be lower due to the impact of COVID-19.

CapitaMall C38U Share Price 23 Oct 2020

Summary

The merger between CapitaMall and CapitaLand Commercial Trust was approved on 29th September 2020. CapitaLand Commercial Trust will be delisted on 3rd November 2020 and CapitaMall Trust will be renamed to CapitaLand Integrated Commercial Trust.

Based on the latest operational performance and 3Q2020 financial results, the headwinds due to COVID-19 can be deeply felt. Cautious consumer sentiment was evidenced by the muted retail sales in August. Even though CapitaMall has embarked on omnichannel retailing, there is still much to do as online sales as a proportion of total retail sales was only 10.9% in August 2020.

At current dividend yield of 6.33%, this is still deemed attractive to me if you are intending to hold CapitaMall Trust for the longer term. I doubt DPU will recover in the short term since many COVID-19 restrictions are still in placed and international borders remained closed.

Now, the magic question. Can you buy CapitaMall Trust now?

I will advice to buy in small lots because COVID-19 has changed the way we live our lives such as shopping and dining. CapitaMall Trust is still an excellent REIT to invest in given the excellent location of its suburban malls.

I am betting on the recovery of the retail sector.