Retail REIT CapitaLand Mall Trust (SGX:C38U) opted to continue to report its financial results on a quarterly basis, and it released its first quarter financial results for the financial year 2020 last Thursday, 30 April 2020, after trading hours.

I have studied the REIT’s latest set of results in detail and in my post today, you’ll find a summary of the most important things you need to know, along with my personal thoughts about it.

Let’s begin…

Key Financial Performances (Q1 FY2019 vs. Q1 FY2020):

The following table is the retail REIT’s key financial performances for the current quarter under review (i.e. Q1 FY2020), compared with the same quarter a year ago (i.e. Q1 FY2019):

Q1 FY2019Q1 FY2020% Variance
Gross Revenue
(S$’mil)		$192.7m$204.3m+6.0%
Property Operating
Expenses (S$’mil)		$52.6m$56.0m+6.4%
Net Property
Income (S$’mil)		$140.1m$148.3m+5.9%
Distributable Income
to Unitholders
(S$’mil)		$106.3m$31.6m-70.3%

The 6.0% quarter-on-quarter (q-o-q) improvement in the REIT’s gross revenue was attributed to the commencement of Funan (both its retail and office components) operations in June 2019, partially offset by the amortisation of rental rebates granted to tenants affected by Covid-19.

Property operating expenses increased by 6.4% on a q-o-q basis due to higher property operating expenses incurred by Funan upon the commencement in operations in June 2019.

The REIT’s net property income also saw a 5.9% q-o-q growth to S$148.3m.

The only negative from the retail REIT’s latest set of financial results is its distributable income to unitholders – it plunged 70.3% q-o-q to just S$31.6m – this was due to the REIT retaining 69%, or S$69.6m, of its taxable income for the quarter in light of the uncertainty and challenges brought about by the evolving Covid-19 pandemic, to maintain their financial capacity and flexibility.

My Thoughts: Apart from the plunge in the retail REIT’s distributable income to unitholders (which came as a no surprise to me because over the past couple of weeks, we’ve seen a number of REITs retaining a huge portion of the distributable income as well to help them cope with the uncertainties relating to the ongoing Covid-19 outbreak in Singapore), the gross revenue and net property income displayed an improvement in its results, which, in my personal opinion, is a good rtesult.

However, I feel that the REIT may record a weaker set of results in the second quarter, as the period from 01 April to 30 June encompasses the two months of “circuit breaker” period (between 07 April and 01 June, both days inclusive), where a huge majority of the retail shops were closed. Distributable income to unitholders in the second quarter will definitely be adversely affected as well, and we should be prepared for a similar magnitude of drop in the distribution per unit in the second quarter (on a q-o-q basis.)

Debt Profile (Q4 FY2019 vs. Q1 FY2020):

Moving on, let us take a look at the REIT’s latest debt profile as at the end of the first quarter of FY2020 on 31 March 2020, compared with the REIT’s debt profile as at the end of the previous quarter ended 31 December 2019 (i.e. Q4 FY2019) to find out if it has improved or deteriorated:

Q4 FY2019Q1 FY2020
Aggregate Leverage (%)32.9%33.3%
Interest Coverage Ratio
(times)		4.7x4.6x
Average Term to Debt Maturity
(years)		5.0 years4.7 years
Average Cost of Debt (%)3.2%3.2%

My Thoughts: Compared to the previous quarter, CapitaLand Mall Trust’s debt profile remains resilient. Its aggregate leverage as at 31 March 2020, at 33.3%, is a safe distance away from the regulatory limit of 50.0%.

Also, with its interest coverage ratio at 4.6x, the retail REIT shouldn’t have problems in servicing its interest cost.

Portfolio Occupancy Profile (Q4 FY2019 vs. Q1 FY2020):

The following table is CapitaLand Mall Trust’s portfolio occupancy profile as at the end of the first quarter of financial year 2020, compared against its portfolio occupancy profile three months ago, ended 31 December 2019 (i.e. Q4 FY2019):

Q4 FY2019Q1 FY2020
Portfolio Occupancy (%)99.3%98.5%
Rental Reversion (%)+0.8%+1.6%
Weighted Average Lease Expiry
(by Gross Rental Income – in Years)		2.1 years1.6 years

My Thoughts: While there was a slight drop in the REIT’s portfolio occupancy rate (down by 0.8 percentage points to 98.5% on 31 March 2020), its rental reversion remained in positive figures (meaning the REIT was able to renew expiring leases at a higher rate.)

Moving forward, as a result of the uncertainties relating to Covid-19, I expect the REIT’s rental reversions to be adversely affected; the same goes to the REIT’s portfolio occupancy, as I feel that some businesses may succumb to the financial impacts of the virus outbreak and wind up.

Distribution Per Unit (Q1 FY2019 vs. Q1 FY2020):

CapitaLand Mall Trust declares a distribution payout to unitholders on a quarterly basis.

For the current quarter under review, the distribution per unit was just 0.85 cents/unit (a 70.5% q-o-q drop from the 2.88 cents/unit declared in Q1 FY2019.) This was due to the REIT withholding a big portion of the distributable income to cope with the uncertainties arising from the Covid-19 outbreak in the near-term.

The ex-date for the upcoming 0.85 cents/unit payout for Q1 FY2020 will be on 11 May 2020, with the record date on 12 May, and payout date on 05 June.

Key Highlights by Mr Tony Tan, CEO of CapitaLand Mall Trust Limited, the Manager of CapitaLand Mall Trust:

  • Impact of Covid-19 is expected to deepen in Q2 FY2020, due to the “circuit breaker” period, during which about 25% of the portfolio tenants are operating.
  • In order to maintain the REIT’s financial resilience, they will be suspending all non-essential operating and capital expenditure, as well as deferring all asset enhancement initiatives and development initiatives. The only exception is the ongoing upgrading works at Lot One Shoppers’ Mall, which will continue.
  • The REIT will be passing on the full savings from the property tax rebates granted by the Singapore government to its tenants. They has also granted additional rebates from 27 to 31 March for tenants who were ordered to close their premises since 27 March 2020. On top of that, eligible tenants were granted a waiver on their turnover rent and were permitted to use their one-month security deposit to offset their rents in March 2020.

In Conclusion:

As I’ve mentioned in the previous sections, as the next quarterly results for the quarter ended 30 June 2020 encompasses the entire 2-month “circuit breaker” period, I am prepared for a significant drop in the REIT’s top- and bottom-line. I am also expecting a similar-scale drop in its distribution per unit in the second quarter.

That said, I am confident of the retail REIT recovering as the “circuit breaker” measures are gradually lifted, and moving forward after the Covid-19 pandemic, the REIT will continue to record growth in many years to come.

CapitaLand Mall Trust will continue to remain in my long-term investment portfolio.

Download Your Copy of CapitaLand Mall Trust’s Q1 FY2020 Results Below:

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

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