Public Announcement: This will be the last article covering CapitaLand China Trust (“CLCT”) till further notice. The reason is due to the uncertainty of the China property market, which is something that I have grown wary of since their property market crisis. While it is showing signs of recovery, it presents itself as a high risk to reward ratio opportunity for those willing to take the risk for a recovery play.
On 6 February 2025, CapitaLand China Trust (“CLCT”) announced their full year result for FY2024. DPU continue to see significant decreases, mainly due to the decrease in net property income. The good news for CLCT is that there was no significant decrease in fair value of investment properties, and they have also managed to find a tenant for the previously vacant Shanghai Fengxian Logistics Park. This may provide stability of its assets and provide assurance for investors willing to take the risk.
Disclaimer: Not financial advice. All data and information provided on this site is for informational purposes only.
Website: Financial Statements And Related Announcement::Full Yearly Results
Photo source: https://www.clct.com.sg/
Financial Highlights
Distribution Per Unit (“DPU”)
| Metrics | Current | Previous |
|---|---|---|
| Distribution Per Unit | -12.3% | No Update |
| Rating | Unfavorable | Unfavorable |
DPU for the second half of FY2024 dropped by 12.3% to SGD0.0264 per share as compared to SGD0.0301 per share in the first half of FY2024. Noted that net property income in RMB also saw a decrease by 6.9% to RMB587 million when compared to RMB631 million in the first half of FY2024. This metric is Unfavorable.
Occupancy
| Metrics | Current | Previous |
|---|---|---|
| Occupancy | 92.5% | 87.6% |
| Rating | Neutral | Unfavorable |
Management have not provided the occupancy rate for this quarter. Based on the NLA and committed occupancy provided of the respective properties, the recomputed total occupancy rate as of 31 December 2024 is 92.5%. This is mainly contributed by Shanghai Fengxian Logistics Park, which has found a new tenant with 100% committed occupancy. The metric has shifted towards Neutral.
Gearing ratio
| Metrics | Current | Previous |
|---|---|---|
| Gearing Ratio | 41.9% | 41.6% |
| Rating | Unfavorable | Unfavorable |
Gearing ratio increased to 41.9% as of 31 December 2024. This metric remains Unfavorable as their high gearing results in significant interest and less room to navigate.
Interest coverage
| Metrics | Current | Previous |
|---|---|---|
| Interest Coverage | 3.0x | 3.0x |
| Rating | Favorable | Favorable |
The adjusted interest coverage remained unchanged at 3.0 times as of 31 December 2024. The metric remains Favorable as the interest coverage is around my preference of 3.0 times.
Debt maturity profile
| Metrics | Current | Previous |
|---|---|---|
| Debt Maturity Profile | 3.4 years | 3.4 years |
| Rating | Favorable | Favorable |
Weighted average term to maturity of their debt remained unchanged at 3.4 years as of 31 December 2024. This metric remains Favorable and it allows them sufficient time to refinance their debts as they fall due. Management has disclosed that debt refinancing for 2025 are completed. Therefore, approximately 14.3% of their debt will mature by FY2026.
Price to Book Ratio
| Metrics | Current | Previous |
|---|---|---|
| Price to Book Ratio | 0.65 | 0.60 |
| Rating | Favorable | Favorable |
The Price to Book (“P/B”) ratio currently stands at 0.65. This is computed using the closing share price of SGD0.730 on 7 February 2025 and the net asset value per share of SGD1.12 as of 31 December 2024. The metric is Favorable as you are paying at a discount to their book value. Nonetheless, there is a key thing to note which will be elaborated below.
As of 7 February 2025, the Market Capitalization is approximately SGD1,256 million.
Website: Yahoo Finance: CapitaLand China Trust (AU8U.SI)
Dividend
| Year | Yield | Total |
|---|---|---|
| 2025 | 3.62% | SGD 0.026 |
| 2024 | 8.23% | SGD 0.060 |
| 2023 | 9.78% | SGD 0.071 |
| 2022 | 8.08% | SGD 0.059 |
| 2021 | 10.29% | SGD 0.075 |
| 2020 | 7.90% | SGD 0.058 |
The dividend payout in the first half of the calendar year 2025 amounted to SGD 0.026 per unit. This is lower than the previous calendar year. When annualized, the expected dividend payout for the calendar year 2025 will be approximately SGD 0.052 per unit.
With a closing share price of SGD0.730 as of 7 February 2025, this translates to a dividend yield of 7.12%. For my benchmark, a general reasonable range would be around an average of 5.25% in the current environment. The dividend yield is Favorable.
Website: Reasonable Dividend Yield 2025Q1 – 5.25%
Take note however that this is a China REIT listed in SGD on SGX, investors may require a higher return to compensate the higher risks.
Interest Rate Sensitivity
The Federal Reserve on 30 January 2025 have kept interest rates unchanged at a range of 4.25% to 4.50%. This is due to significant uncertainty in the U.S. economic landscape, with a healthy set of macroeconomic fundamentals that have changed little in recent months, but coming decisions from the Trump administration on immigration, tariffs, taxes and other areas that could prove disruptive.
Website: Fed leaves rates unchanged, sees no hurry to cut again
CLCT have provided the interest rate sensitivity analysis as below. Should the interest rate for the SGD and RMB denominated loans change by another 1.0%, using FY2024 DPU of 5.65 cents as a base, DPU is expected to change by 2.1% and 2.5% respectively.
| Change in Interest Rates for SGD Loan | Change in DPU (cents) | Change as % of FY2024 DPU |
|---|---|---|
| 50 bps | 0.06 | 1.1% |
| 100 bps | 0.12 | 2.1% |
| 150 bps | 0.18 | 3.2% |
| 200 bps | 0.24 | 4.2% |
| Change in Interest Rates for RMB Loan | Change in DPU (cents) | Change as % of FY2024 DPU |
|---|---|---|
| 50 bps | 0.07 | 1.2% |
| 100 bps | 0.14 | 2.5% |
| 150 bps | 0.21 | 3.7% |
| 200 bps | 0.28 | 5.0% |
Key things to note
Singapore Exchange Rate Policy
In view of the current high inflation environment, Singapore adopts an exchange rate policy in order to manage the inflation and ensure price stability as a sound basis for sustainable economic growth. This policy is different from those used by other countries. As a result of this policy, RMB has depreciated against SGD over the last few quarters.
In one of the previous quarters, CLCT’s financials have shown improvement when denominated in RMB, where net property income and valuations of the leasehold properties have increased. However, when translated to SGD this cause DPU and asset valuations to decrease. Singapore is likely to continue with their exchange rate policy over the next few years to manage the macro-economic conditions. Investors should therefore take note and assess their risk appetite accordingly.
Summary
| Metrics | Financials | Rating |
|---|---|---|
| Distribution Per Unit | -12.3% | Unfavorable |
| Occupancy | 92.5% | Neutral |
| Gearing Ratio | 41.9% | Unfavorable |
| Interest Coverage | 3.0x | Favorable |
| Debt Maturity Profile | 3.4 years | Favorable |
| Price to Book Ratio | 0.65 | Favorable |
| Overall | Neutral |
Overall, the metrics indicate that it continues to remain Neutral to invest in CLCT. With the improvement in occupancy rate, DPU may improve over the next few quarters which can help to improve their financial position. Investors will need to monitor if there are any significant changes in the China property market.
Background
CLCT is Singapore’s largest China-focused real estate investment trust (“REIT”). CLCT’s portfolio constitutes of shopping malls, business parks and logistics parks. CLCT was listed on the Singapore Exchange Securities Trading Limited (SGX-ST) on 8 December 2006. The REIT’s objective is to invest on a long-term basis, in a diversified portfolio of income-producing real estate and real estate-related assets in mainland China, Hong Kong and Macau that are used primarily for retail, office and industrial purposes (including business parks, logistics facilities, data centres and integrated developments).
CLCT is managed by CapitaLand China Trust Management Limited (“CLCTML”), a wholly owned subsidiary of Singapore-listed CapitaLand Investment Limited (“CLI”), a leading global real estate investment manager with a strong Asia foothold.
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Website: CapitaLand China Trust (SGX: AU8U): 2024 Third Quarter Business Update
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