CapitaLand Mall Trust share price: 3 highlights from H1 earnings

Here are three key trading takeaways from CapitaMall Trust's (SGX: C38U) latest financial update.

CapitaLand Mall Trust (SGX: C38U) released its first half (H1) and Q2 earnings for fiscal 2020 on Wednesday 22 July 2020.

Here are three main highlights from the retail-focused real estate investment trust’s (REIT) latest financial update.

1. CapitaMall Trust’s H1 2020 DPU (dividend) drops by 49%

The company posted a net property income of S$216.4 million for the period 01 January to 30 June 2020, 20.8% lower than the same period a year prior.

Gross revenue for H1 2020 fell to S$318.4 million from S$382.3 million in H1 2019.

Distributable income for H1 2020 came in at S$109.7 million – down 48.7% from H1 2019, with distribution per unit (dividends in REIT terms) amounting to S$0.0296 – down 49% from H1 2019’s S$0.0580.

The group said that the lower earnings was mainly due to lower gross rental income arising from the rental waivers of S$76.5 million granted to tenants affected by Covid-19, as well as lower gross turnover rent and car park income during Singapore’s lockdown period.

On a quarterly basis, distributable income for the second quarter ended 30 June 2020 fell 27.5% year-on-year to S$78.1 million from S$108 million. The company said that this included the release of S$23.2 million or one-third of the S$69.6 million taxable distributable income retained in 1Q 2020.

Consequently, distribution per unit (DPU) for Q2 was S$0.0211 – 27.7% lower than in Q2 2019.

DPU will be paid out to unitholders on 28 August 2020.

2. CapitaMall Trust outlook: ‘cautious view of near-term conditions’

In terms of outlook, Tony Tan, CEO of CapitaLand Mall Trust Management Limited, said that although the phased reopening of Singapore’s economy from June 2020 has brought some relief to businesses, the company continues to maintain ‘a cautious view of near-term market conditions, given the uncertain economic climate and softening demand for retail space.

Consequently, the group stated that it will retain the balance S$46.4 million of taxable distributable income from Q1 2020, after releasing S$23.2 million in Q2 2020.

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Notwithstanding, Tan did note that between 19 June and 05 July – when lockdown restrictions began to be eased – average shopper traffic for the period managed to recover to 53% of the level a year ago.

‘Although CapitaLand Mall Trust’s operating performance is still below pre-Covid-19 levels, we are encouraged by the weekly improvements in shopper traffic since reopening,’ he said.

‘In the meantime, we are sparing no effort to enhance operational efficiency and build greater resilience into CapitaLand Mall Trust’s retail ecosystem in preparation for the eventual upturn.’

3. CapitaMall Trust received higher share price targets

Following the release of its H1 report, CapitaLand Mall Trust shares opened slightly lower on Wednesday 22 July at S$2.01 a share.

Analysts from UOB and DBS earlier this month gave the stock a ‘buy’ rating, alongside higher 12-month price targets, citing the recovery of the retail sector with the easing of lockdown measures as a catalyst.

UOB gave the stock a price target of S$2.60, stating that shares could rally in the coming months with more retail shops resuming operations, a recovery in consumer spending as the Singapore economy recovers from the pandemic, and the impending merger of CapitaLand Mall Trust and CapitaLand Commercial Trust.

DBS analysts raised their fair value price estimates to S$2.40 a share (From S$2.15 previously), on the expectations for a potential boost to the REIT’s central malls as the office crowds return.

‘As the worst looks to be over, CMT offers a strong value proposition as it trades near a historical high yield premium of 70bps against peer, Frasers Centrepoint Trust, with DPU recovering 22% y-o-y in FY21 based on our estimates,’ they wrote.

Key risks to this positive view, they added, is a spike in new Covid-19 cases that could potentially delay other impending lockdown easing measures and further tenant rebate measures to impact their FY20 estimates.

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