CapitaLand Retail China Trust NPI up 7% to $39.8m

The increase was driven by stronger rental growth from its core multi-tenanted malls.

CapitaLand Retail China Trust’s (CRCT) net property income (NPI) jumped 7% YoY to $39.8m in Q1 2019 from $37.18m in 2018, an announcement revealed. Revenue inched up 1.1% YoY from $55.37m to $55.96m.

The growth was underpinned by stronger rental growth from the core multi-tenanted malls, and lower operating expenses, offset mainly by lower revenue in CapitaMall Wuhu which was closed and in the process of being divested to an external party. Property expenses for Q1 2019 decreased 11.2% YoY or by $2m due to exclusion of land rental expenses.

Also read: CapitaLand's China retail unit to sell CapitaMall Wuhu after shutdown

In addition, other income increased due to higher atrium revenue, according to CRCT’s financial statement.

Core income available for distribution to unitholders rose 4.9% YoY to $24.9m in Q1 from $23.7m in 2018, whilst distribution per unit (DPU) dipped 5.8% YoY to $0.0259 from $0.0275.

Based on CRCT’s closing price of $1.51 on 24 April 2019, the annualised distribution yield for Q1 2019 was 7%.

According to Tan Tze Wooi, CEO of CapitaLand Retail China Trust Management (CRCTML), China's economy expanded at an encouraging pace of 6.4% in Q1 2019, with consumer demand showing signs of improvement.

“The fiscal stimulus rolled out by the Chinese government, which include business and individual tax cuts, is expected to boost consumer sentiments. These developments bode well for CRCT, which has sustained its growth momentum into the new year through proactive asset management and value enhancement initiatives,” he said in a statement.

In Q1 2019, CRCT’s tenants’ sales increased 9.8% YoY, whilst shopper traffic grew 14%. Portfolio occupancy as at 31 March 2019 remained high, at 97.4%5.

“To ensure our malls stay attractive, CRCT’s leasing strategy is geared towards riding new trends to meet changing consumer demand. We will continue to partner with emerging local and international brands,” Tan added. “We will also harness synergy from our sponsor’s extensive retail network, which has already led to successful collaborations with popular tenants in several of CRCT malls.”

To mitigate the impact of foreign currency fluctuations, CRCTML has reportedly hedged approximately 80% of CRCT’s distributable income into SGD.

CRCTML has also entered into an agreement in Q1 2019 to divest CRCT’s 51% stake in CapitaMall Wuhu to an unrelated third party, the financial statement revealed. The enhanced financial flexibility from the divestment, coupled with CRCT’s strong financial position, is expected to enable the firm to pursue acquisition opportunities to drive new growth and further optimise CRCT’s portfolio.