Is CapitaLand China Trust REIT A Good Buy In 2025? [Fundamental Analysis]

In this article, we'll conduct a fundamental analysis and review of CapitaLand China Trust and its suitability to achieve the following investment objective: To deliver a stable dividend yield of 5% to 6% per year while having high capital preservation ability.

Information Is Accurate Up To Feb 2025

Business Description

CapitaLand China Trust (previously known as CapitaLand Retail China Trust) is a diversified REIT that was listed in 2006 and owns retail, business offices and industrial properties in China.

What I Like About CCT:

• Long track record and strong sponsor

What I Do Not Like About CCT:

• The bulk of the debts are denominated in SGD, creating FX risks that may result in poorer performances in an event where SGD strengthens against RMB as 100% of CLCT operations are based in China and denominated in RMB. While the management has since moved towards having a larger proportion of RMB debt, it is still not substantial enough (FY2024: ~35%) to achieve a natural hedge.

  
  

• The remaining underlying land lease is very short for most of their portfolio (the 2040s) which is a cause for concern as the scale of the impact upon expiry on the net asset value is unknown as there has been no precedence. (Figure 10)

Updates From Recent Performance (FY 2024)

General Comments:

• DPU decreased by 16% on the back of a weaker overall performance.
  

• Stronger retail performance was offset by the lower contributions from its business parks and logistics parks, resulting in a 5.8% yoy decline in NPI.
  

• Occupancy in logistic parks recovered substantially from 15.6% to 97.6% though at a significant negative rental reversion of 24.5% which resulted in poorer overall performances.
  

• Portfolio valuations declined by 1.7% with capitalization rates remaining largely unchanged.

  
  

• Cost of borrowing decreased by 0.06% to 3.51% y.o.y with no re-financing due in 2025

  
  

Positive Headwinds:

• Chinese regulators have introduced measures to boost domestic demand and drive consumption, alongside more proactive fiscal and monetary policies.

Negative Headwinds:

• Increased geo-political tension and risk of trade war might escalate the friendshoring trend which may result in a continued depressed operating performance in business and industrial parks.

  
  

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Disclaimer:

This article is meant to be the opinion of the author

This article is for information purposes only

This article should not be seen as financial advice

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