Retail REIT CapitaLand Mall Trust (SGX:C38U) held its AGM for FY2019 on Friday, 26 June 2020, at 4pm. Due to the ongoing Covid-19 outbreak, along with the safe distancing measures implemented by the Singapore government, the meeting was held online.

I have attended the meeting as a unitholder and in this post, you will find a summary of the most important pointers of CEO Tony Tan Tee Hieong’s presentation to take note of (which I have compiled for the benefit of unitholders who did not manage to attend the meeting):

Key Highlights of FY2019:

  • Distributable income have grew steadily over the years, and in the latest financial year under review (i.e. FY2019), it saw a 7.5% year-on-year (y-o-y) improvement to S$441.6m. Correspondingly, the REIT saw its distribution per unit increase by 4.1% compared to the previous financial year to 11.97 cents/unit
  • Annual shopper traffic saw a 1.4% y-o-y improvement due to stronger performance from suburban malls, while its tenants’ sales per square foot dipped by 1.4% in the same time period due to lower sales from the REIT’s home furnishing and electrical and electronics tenants
  • In terms of the REIT’s overall portfolio occupancy rate, at 99.3% as at 31 December 2019, Mr Tan highlighted that it is above Singapore’s average portfolio occupancy for retail malls (which is 92.9% for suburban malls, and 92.0% for Orchard Road malls)
  • With regard to CapitaLand Mall Trust’s debt maturity profile as at 31 December 2019, Mr Tan updated while there is S$310.2m of debt that will be expiring in the year 2020, there are bank facilities in place to refinance the entire amount. On top of that, Mr Tan also added that there are no foreign exchange risks as all the REIT’s debts are swapped to the Singapore dollar

Debt Profile as at 31 March 2020:

The following are some of the key highlights, along with CEO Mr Tan’s comments in brackets:

  • Aggregate Leverage: 33.3% (assuming on a 40% gearing ratio, there still remain a S$1.4b of debt headroom)
  • Average Term to Debt Maturity (years): 4.7 (one of the longest among the S-REITs)
  • CMT’s Issuer Rating: ‘A2’ (its good credit rating allows the REIT to be well-weathered for the challenges ahead)

Key Developments:

The following are some of the REIT’s key developments to highlight:

  • Highlight of the year 2019 was the re-opening of Funan, where it recorded a foot traffic of 1.3mil/month, with its average tenant sale in-line with the REIT’s overall portfolio
  • Asset enhancement initiative works Lot One Shopper’s Mall, where it will see an upgraded cinema (from 4 big halls to 6 smaller halls, along with an expanded movie selection and an enhanced experience for movie-goers), along with a bigger library (expanded by 600 square metres); Upgrading works are expected to complete progressively from 2H 2020, depending on the government’s relaxation of measures regarding renovation works
  • CapitaStar app has now more than one million members
  • Launch of new offfline-to-online platforms (in eCapitaMall and CapitaEats) on 01 June 2020, allowing the retail REIT’s tenants to leverage on their landlord’s brand awareness and digital capabilities to drive sales

Support for Tenants in Light of Covid-19:

Some of the support that the retail REIT have provided for its retail tenants including:

  • Rental waiver for tenants ordered to close their premises by MOH since 27 March 2020
  • 100% rental rebate for almost all of its retail tenants for the months of April, May, and June
  • Engagement with tenants to explore alternative leasing strategies to adapt to the new operating environment, along with leveraging on technology to extend customer outreach and increase online business opportunities

Outlook for FY2020 Ahead:

  • With Phase Two of the re-opening of Singapore on 19 June 2020, Mr Tan updated that a large majority of the REIT’s tenants have resumed operations, and that the shopper traffic recorded on the first weekend has been encouraging
  • Despite that, consumer sentiment continues to remain cautious as the MTI downgrades Singapore’s 2020 GDP growth forecast to between -7.0% and -4.0%, and this will put pressure on the REIT’s rental reversion for expiring leases and occupancy rate
  • Finally, Mr Tan concluded that amid the uncertainty, the REIT will continue to exercise caution, and maintain a healthy retail eco-system. He is confident of the REIT being able to emerge stronger from the pandemic, and continue to deliver value to its unitholders

In Conclusion:

The virtual AGM was a relatively short one – slightly less than 30 minutes from start to finish. I was hoping the CEO would cover a little bit on the pending merger of CapitaLand Commercial Trust with CapitaLand Mall Trust to formed the enlarged REIT (which will be named as CapitaLand Integrated Commercial Trust), such as some indication as to when the EGM will be held to seek the unitholders’ approval, but nothing was mentioned on that.

While Covid-19 may result in the retail REIT’s performance in the near-term (especially in the coming second quarter results, where the period under review encompasses the entire two-month circuit breaker period), but I am confident of its stronger growth when the Covid-19 passes, and also after the completion of the REIT’s merger with CapitaLand Commercial Trust to form the enlarged REIT.

Related Documents:

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

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