Monday 22 April 2013

CapitaRetail China Trust

OCBC on 22 Apr 2013

CRCT's 1Q13 results were generally in line with ours and the street's expectations. Gross revenue climbed 3.7% YoY to S$39.3m and net property income rose 1.8% YoY to S$25.9m. On a QoQ basis, NPI at CapitaMall Minzhongleyuan (MZLY) fell 32% to RMB4.7m. We expect NPI from MZLY to dip further in the coming quarters since the AEI there is being fast-tracked, with temporary closure of the mall from Jul 2013 to 2Q14. According to management, CRCT has secured offers at favorable terms to refinance S$150.5m due in Jun 2013. Adjusting our estimates slightly, we increase our fair value from S$1.72 to S$1.76 but we maintain our HOLD rating on CRCT on valuation grounds.

1Q13 NPI rose 1.8% YoY
CRCT's 1Q13 results were generally in line with ours and the street's expectations. Gross revenue climbed 3.7% YoY to S$39.3m and net property income rose 1.8% YoY to S$25.9m. Increases in both gross revenue and NPI was due to good tenancy adjustments at CapitaMall Saihan and CapitaMall Wuhu. NPI margin decreased due to: 1) accrual to compensation to tenants from pre-termination of leases as part of brand refinement and to facilitate AEI work at CapitaMall Xizhimen and CapitaMall Minzhongleyuan (MZLY) respectively, and 2) higher property management fees and staff-related costs. DPU fell 4.1% YoY to 2.31 S cents; excluding the 57m units issued through private placement in Oct 2012, DPU would have been 3.7% higher YoY.

NPI at Minzhongleyuan fel 32% QoQ
For 1Q13, tenant's sales and shopper traffic grew by 11.1% and 10.6% YoY respectively. These figures refer to the multi-tenanted malls, excluding MZLY, which is undergoing AEI. Excluding MZLY, NPI grew 7.1% YoY to RMB127.3m. On a QoQ basis, NPI at MZLY fell 32% to RMB4.7m. We expect NPI from MZLY to dip further in the coming quarters since the AEI there is being fast-tracked, with temporary closure of the mall from Jul 2013 to 2Q14.

Secured refinancing offers; positive retail outlook
CRCT has a reasonably good financial position, with gearing at 25.4%, and interest coverage ratio of 8.4x, although average term to maturity is not long at 1.3 years. According to management, CRCT has secured offers at favorable terms to refinance S$150.5m due in Jun 2013. All-in cost of debt is expected to be maintained below 3%. For 2013, the Chinese government is targeting the country's GDP and retail sales to grow at 7.5% and 14.5% respectively. To stimulate consumption, the government is promoting urbanisation, increasing wages and encouraging credit consumption.

Maintain HOLD 
Adjusting our estimates slightly, we increase our fair value from S$1.72 to S$1.76 but we maintain our HOLD rating on CRCT on valuation grounds.

No comments:

Post a Comment