REIT CapitaLand Mall Trust (SGX:C38U) released its 3Q results, as well as for the first 9-months of the financial year 2020 (ended 30 September) early this morning.

The post was originally posted here. The writer, Lim Jun Yuan is a veteran community member and blogger on InvestingNote, with a username known as @ljunyuan and has 1412 followers.

This is also the last time the REIT will be reporting its results under CapitaLand Mall Trust – it will be renamed as CapitaLand Integrated Commercial Trust with effect from 03 November 2020 (you can read the news report about this in full here.)

Apart from its financial results, debt and occupancy profile, and distribution payout to unitholders, I’m also interested to find out whether or not there are any improvements compared to the second quarter (ended 30 June 2020) where its results were badly affected due to the two-month circuit breaker period.

Let’s begin…

Financial Results (Q3 FY2019 vs. Q3 FY2020, and 9M FY2019 vs. 9M FY2020)

Q3 FY2019 vs. Q3 FY2020:

	Q3 FY2019	Q3 FY2020	% Variation
Gross Revenue (S$’mil)	$201.1m	$150.3m	-25.3%
Property Operating Expenses (S$’mil)	$56.9m	$45.8m	-19.4%
Net Property Income (S$’mil)	$144.2m	$104.4m	-27.6%
Distributable Income to Unitholders (S$’mil)	$113.0m	$114.3m	+1.2%

As expected, compared to the same time period last year (i.e. Q3 FY2019 ended 30 September 2019), it was a weaker set of results for the retail REIT due to negative impacts relating to the ongoing Covid-19 pandemic.

Particularly, its gross revenue was down 25.3% on a quarter-on-quarter (q-o-q) basis mainly due to rental waivers (amounting to S$29.5m) granted to eligible tenants, along with a lower rental on gross turnover and other income.

Property operating expenses fell 19.4% q-o-q due to lower property tax and property management fees as a result of lower gross revenue and net property income, property management reimbursable, as well as lower marketing, utilities, and maintenance expenses.

However, its distributable income to unitholders edged up by 1.2% q-o-q due to the REIT’s release of S$36.4m (or 78% of the S$46.4m) of taxable income available for distribution retained in 1H FY2020.

Q2 FY2020 vs. Q3 FY2020:

You can check out the REIT’s results for the second quarter of FY 2020 here.

Compared to the previous quarter, its revenue and net property income decline
(on a q-o-q basis) have reduced – the former saw a 25.3% drop in Q3, compared to a 39.8% drop in Q2, while the latter saw a 27.6% decline in Q3, compared to a 48.9% decline in Q2.

Personally, I am happy to note that the decline was much lesser in the current quarter under review (compared to the last) and that I am optimistic that the REIT’s results for the final quarter will be a better one, due to contributions from the property portfolio of CapitaLand Commercial Trust.

Also, as Singapore is on the verge of moving into Phase 3 of the safe transition, retail REITs like CapitaLand Mall Trust is definitely going to benefit due to a further improvement in shopper traffic to its malls, and possibly better tenant sales (compared to the previous quarters this financial year.)

9M FY2019 vs. 9M FY2020:

	9M FY2019	9M FY2020	% Variation
Gross Revenue (S$’mil)	$583.4m	$468.7m	-19.7%
Property Operating Expenses (S$’mil)	$165.9m	$147.9m	-10.9%
Net Property Income (S$’mil)	$417.5m	$320.8m	-23.2%
Distributable Income to Unitholders (S$’mil)	$327.0m	$224.0m	-31.5%

Again, no surprises here that on a year-on-year (y-o-y) basis, the retail REIT’s results is a weaker one (no thanks to the ongoing Covid-19 pandemic) – the decline in its gross revenue was largely due to S$106.0m of rental waivers granted to its tenants; on the other hand, its property operating expenses fell due to lower property management fees.

My Thoughts: The latest set of results were all within my expectations. Barring a second wave of the Covid-19 outbreak in Singapore, the results of the REIT should continue to record improvements in the coming quarters ahead.

Debt Profile (Q2 FY2020 vs. Q3 FY2020)

Moving on, let us take a look at the REIT’s debt profile to find out whether or not it has improved or deteriorated three months on:

	Q2 FY2020	Q3 FY2020
Gearing Ratio (%)	34.4%	34.4%
Interest Coverage Ratio (times)	4.3x	4.0x
Average Term to Debt Maturity (years)	4.5 years	4.0 years
Average Cost of Debt (%)	3.1%	3.1%

My Thoughts: Compared to the previous quarter (i.e. Q2 FY2020 ended 30 June 2020), the REIT’s debt profile has largely remained stable.

Portfolio Occupancy Profile (Q2 FY2020 vs. Q3 FY2020)

Just like the REIT’s debt profile, I will be comparing its portfolio occupancy profile recorded for the current quarter under review (i.e. Q3 FY2020) against the previous quarter (i.e. Q2 FY2020) to find out if it has improved or deteriorated:

	Q3 FY2019	Q3 FY2020
Portfolio Occupancy (%)	97.7%	98.0%
Rental Reversion (%)	+0.1%	-4.4%
Portfolio WALE (years)	2.0 years	2.0 years

My Thoughts: For the current quarter under review, its rental reversion was -4.4% due to lower rental rates renewed for expiring leases in all of its malls except for in IMM (where it recorded a positive rental reversion of 0.4%), and in Plaza Singapura (where it recorded a positive rental reversion of 0.3%.)

On the other hand, the REIT’s portfolio occupancy remained resilient at 98.0% as at the end of the third quarter of FY2020.

Distribution Per Unit (Q3 FY2019 vs. Q3 FY2020)

	Q3 FY2019	Q3 FY2020	% Variation
Distribution Per Unit (S$’cents)	3.06 cents	3.10 cents	+1.3%

Compared to the same time period last year, its distribution per unit to unitholders inched up 1.3%, due to the REIT releasing 78% of the taxable income retained in 1H FY2020.

The REIT has already gone ex-dividend on 19 October 2020, and the payout will be on 19 November 2020.

My Thoughts: I expected the REIT to release income withheld and distribute to existing unitholders before the completion of the merger (with CapitaLand Commercial Trust.)

In Conclusion

On the whole, I am happy to note that the drop (in its gross revenue and net property income) in the quarter under review is lesser compared to the previous quarter – this is within my expectations as shoppers have since gradually returned to the malls since Singapore moved into Phase 2 of the safe transition from 19 June 2020.

It is also good to note that, at the time of writing, Singapore is on the verge of moving into Phase 3 of the safe transition – which means the shopper traffic is likely to see a further improvement moving forward.

Additionally, I am also excited about the opportunities of the enlarged CapitaLand Integrated Commercial Trust.

Having said that, this post is by no means a buy or sell call for the REIT’s units. Please do your own due diligence before you make any investment decisions.

Related Documents

• Press Release

• Financial Results

• Presentation Slides

Disclaimer: At the time of writing, I am a unitholder of CapitaLand Mall Trust.