• 1Q16 DPU grew 2.7% YoY
• Positive rental reversions of 7.3% in 1Q16
• Maintain HOLD

1Q16 results within expectations

CapitaLand Retail China Trust (CRCT) reported its 1Q16 results which came within our expectations. Gross revenue increased 1.1% YoY to S$52.3m, largely due to a weaker CNY relative to SGD, as gross revenue in CNY terms rose 2.5% to CNY256.5m.

The latter was affected by the continued impact of the Zhongshan Avenue road closure on CapitaMall Minzhongleyuan (MZLY).

Trade mix adjustments at CapitaMall Wuhu also posed a drag. Rental growth in its other multi-tenanted malls continued to be healthy at 4.1% YoY. DPU grew 2.7% YoY to 2.71 S cents.

Positive gross revenue and NPI growth at most malls

Aside from MZLY and Wuhu, CRCT’s multitenanted and master-leased malls delivered positive gross revenue growth of 3.5% YoY and NPI growth of 3.2% YoY in RMB terms in 1Q16. Overall portfolio committed occupancy fell 0.5ppt QoQ to 94.6% with most multi-tenanted malls showing a decrease.

Tenants’ sales growth clocked a mild growth of 1.0% YoY, while shopper traffic fell 1.4% YoY. Portfolio rental reversions came in at 7.3% in 1Q16, slightly lower than FY15’s 8.1%. Excluding Wuhu, the rental reversion rate would have been 8.1%.

We note that for the rest of 2016, MZLY has 33.0% of its leases (as a percentage of the mall’s rental income) expiring while Wuhu has 19.4%; this may continue to exert a drag on CRCT’s rental reversions for FY16.

Maintain HOLD

As at 31 Dec 2015, CRCT had a healthy gearing ratio of 28.7%, with an average cost of debt of 3.04%. 74.1% of its total borrowings are fixed (81.8% if we exclude onshore RMB denominated loans). Maintain HOLD with fair value estimate of S$1.48.

Source: OCBC Research - 14 Apr 2016