An Income Grower's Diary: Is this REIT a value Buy at it's Current Price?

Disclaimer: This blog post is for entertainment purposes only where I share my findings and opinions about stocks. It does not constitute any buy or sell recommendation. Always DYODD before making any trade or investment decision.

Background

The company that I want to blog about today is none other than Capitaland Retail China Trust. This REIT may have slipped under the radar of many investors as I don't really hear many people talk about it and the transacted volume is not as high compared to it's big bro, Capitaland Mall Trust. Disclosure: I currently own some shares in this REIT .

I have read it's presentation slides for Citi ASEAN C-Suite Investor Conference 2018 held in June 2018. As usual, I will highlight some points in the slides that I find worth noting for this REIT.

The beginning of the slides already caught my attention. The dividend yield was reported at 7.1% based on annualised 1Q 2018 distribution per unit of 11.15 cents at closing price of $1.58 on 31 March 2018. That's a very attractive yield compared to most of the Retail REITs with malls located in Singapore. However, yield is not everything. Let's look at other financial figures to find out if CRCT is really attractive at current pricing. The share price is currently lower than $1.58 at the time of writing this blog post. This means the yield is even higher!

Above 7% dividend yield! Nice!!

The REIT Manager is capable of growing the assets and distributable income steadily over the last 10 years.

Gearing looks good at 32.5% . Cost of debt is only 2.51%. As a comparison, CMT's cost of debt is 3.2% and interest coverage is 4.8%. Since we are now in a rising interest rate environment, it is especially important that the REITs that we own has a low cost of debt and a high interest coverage. Similar to CMT, all CRCT's properties are 100% unencumbered.

The Manager has completed a 51% stake acquisition of Rock Square Mall in Jan 2018 as a joint venture. Occupancy of this Mall has improved to 97.1% from previous 96.4% and the rental reversion rate has improved immensely by more than 20%. This demonstrates the capability of the REIT manager to improve occupancy and rental rate of it's malls.

The slide below shows the occupancy rate of it's various malls. 1 thing to note is there are currently 2 malls under stabilisation. We should expect the DPU to further grow after the stabilisation has completed.

The slide below shows the rental reversion of the Malls. Most of the Malls have positive rental reversion. There are only 2 malls with negative reversion and the reasons are shown under Notes.