CapitaMall Trust DPU Rises for 4Q2015

CapitaMall Trust Logo

This post came a bit late as I place my priorities reviewing other REITs. I have been holding on to CapitaMall Trust for 5 years and I have less worries about its performance. Its strategic location of its assets (near to MRT stations) gave me the confidence about CapitaMall Trust.

CapitaMall Trust announces its results on 22nd January 2016. A higher Distribution Per Unit (DPU) of 2.88 cents was announced for Q42015 which is 0.7% increase as compared to 2.86 cents in Q4FY14. Based on CapitaMall Trust closing price of S$1.960 per unit on 21 January 2016, the distribution yield is 5.83%.

Net Property Income is up 18.6% as compared to 4Q2014.

4Q2015
(S$’000)
4Q2014
(S$ ‘000)
YoY(%)
Gross Revenue180,380165,2029.2
Net Property Income125,697105,95418.6
Distributable Amount101,89499,1122.8
Distribution Per Unit (“DPU”) (cents)2.882.860.7
Annualised DPU (cents)11.4311.350.7

It is quite interesting to see CapitaMall Trust compares against other forms of investment.

CapitaMall Trust Attractive Investment

Debt Maturity Profile

100% of CapitaMall Trust assets are unencumbered. The chart below shows the debt maturity profile for different type of instruments that CapitaMall is involved in with regards to debt. It is complicated!

CapitaMall Debt Maturity 4Q2015

Portfolio

CapitaMall Trust has a large portfolio of shopping malls. If you notice, all of the shopping malls that CapitaMall Trust owns are near or walking distance from MRT stations. This boosts shoppers traffic to the malls.

CapitaMall Portfolio 2015

Asset Enhancement Initiatives

Clark Quay

More than 90% of reconfigured space committed in Block C. Tenants include Ramen Keisuke Lobster King, Maziga Cafe & Bollywood Club, DV8 Club, Warehouse and Zouk, Prive Clarke Quay.

IMM Building

Completed phase 2 of Asset Enhancement Initiatives.

Funan DigitaLife Mall

We know that Funan DigitaLife Mall is closing for redevelopment. (Read more Funan DigitaLife Mall Closing for Redevelopment).

How Singapore REITs Defend against Fed Rate Hike

Rising Interest Rates

I was curious on how the Singapore REITs I held in my portfolio will hold the fort against the recent Fed rate hike. Thus, I dig into the financial result releases by each REIT recently for more details. I learnt a new term known as “Interest Rate Swap”. REITs issue bonds or notes as a form of interest rate swap.

Below is the definition taken from Investopedia. There is a video where you can watch for easier understanding.

An agreement between two parties (known as counterparties) where one stream of future interest payments is exchanged for another based on a specified principal amount. Interest rate swaps often exchange a fixed payment for a floating payment that is linked to an interest rate (most often the LIBOR). A company will typically use interest rate swaps to limit or manage exposure to fluctuations in interest rates, or to obtain a marginally lower interest rate than it would have been able to get without the swap.

Below are some statements extracted from the financial results which indicate fixed rate interest as a form of hedging or usage of interest rate swap to manage exposure to interest rate fluctuations.

Cambridge Industrial Trust

Cambridge Industrial Trust has 96.5% of interest rate exposure fixed for next 3.2 years. Borrowing costs significantly insulated against interest rate increases.

Frasers Commercial Trust

Frasers Commercial Trust has 81% of its debt hedged and 19% floating.

(Read more: Frasers Commercial Trust Achieves All Time High DPU of 9.71% for FY15)

Suntec REIT

Uses interest rate swap to manage exposure to fluctuations in interest rates.

(Read more: Suntec REIT DPU Rises for 3Q2015)

Soilbuild Business REIT

95% of debt hedged.

Far East Hospitality Trust

Uses interest rate swap to manage exposure to fluctuations in interest rates.

(Read more: Far East Hospitality Trust DPU Fall for 3Q2015)

CapitaMall Trust

Uses interest rate swap to manage exposure to fluctuations in interest rates.

Keppel REIT

Increased fixed-rate loans to over 70%, which will insulate against interest rate fluctuations, while allowing for financial and operational flexibility.

(Read more: Keppel REIT announces DPU of 1.70 cents for 3Q2015)

Mapletree Commercial Trust

Uses interest rate swap to manage exposure to fluctuations in interest rates.

(Read more: Mapletree Commercial Trust DPU Rises 2.5% to 2.02 cents 2QFY15)

OUE Hospitality Trust

Uses interest rate swap to manage exposure to fluctuations in interest rates.

ParkwayLife REIT

ParkwayLife REIT has hedged approximately 78% of its interest rate exposure.

(Read more: Parkway Life REIT DPU Increases for 3Q2015)

Conclusion

As a conclusion, we can see that most Singapore REITs are well defended against the Fed interest rate hike.