CRCT

CRCT: 1Q16 DPU of 2.71¢ (+2.7% y/y) was in line with estimates, supported by distributable income of $23.2m (+4.5%).

Gross revenue inched 1.9% (+2.5% in CNY terms) higher to $55.6m, while NPI climbed 6.2% to $36.7m, on the back of a 7.3% rental uplift, but was pared by a weaker yuan. Operating expenses were also lower.

Excluding the Minzhongleyuan (Wuhan) and Wuhu malls, which are undergoing stabilisation, traffic at multi-tenanted malls would have grown 2% y/y (-2% q/q), while tenant sales would have climbed 3.2% y/y (-3.2% q/q). Beijing, where the majority of its portfolio is located, saw retail sales grow 1% in the first two months of 2016.

Portfolio occupancy slipped marginally to 94.6% (-0.5ppt q/q) with weighted average lease to expiry of 8.1 years.

Aggregate leverage remains very comfortable at 28.7% (+1ppt q/q), lower than the 32.9% average among S-REITs. Average cost of debt edged up to 3.04% (+0.05ppt), with tenor of 2.61 years.

Management is confident of CRCT’s prospects, given China’s transition to be a consumption-led economy.

On AEIs, the Saihan mall’s façade upgrading and the Grand Canyon mall’s toilet upgrade will be completed by 3Q16. At Minzhongleyuan and Wuhu, management will continue sharpening the competitive advantages of the malls.

CRCT is currently trading at 7.4% annualised 1Q16 yield, well above retail S-REIT yield of 6.7%, and 0.9x P/B.