What You Should Know About CLCT’s FY Results (SGX:AU8U)

CLCT’s management just released it’s FY 2021 results quite recently. As the largest S-REIT focused on the Asian giant, it’s a familiar bet for REIT investors looking to tap into Chinese consumer spending.

The REIT’s been busy conducting acquisitions in the past two years. It now carries a mandate to invest in retail, office and industrial assets in China. This includes business parks, logistics facilities, data centers and integrated developments as well.

As of January 2022, it currently manages a total of 20 assets spread out over 12 cities. A total of 11 retail, 5 business parks, and 4 logistic properties constitute it’s portfolio.

A Pretty Good Showing

The REIT reported a 72.9% increase in Gross profit, along with a 78.4% increase in Net property income. Most importantly, investors will be satisfied to know that Distribution per unit has increased by 37.5%.

Management notes improvements in shopper traffic and tenant sales in it’s retail segment. Across the board, occupancy rates for all it’s segments are lifting off as well.

Average WALE by GRI stands as 2.2 years. Valuations for it’s retail properties are stable, with very slight improvements.

Both the business park and logistic properties are experiencing positive rental reversions for new leases. The retail segment however, is still slightly affected.

Overall gearing has increased slightly to 37.7%. Compared to other REITs, this is still quite modest. 77% of CLCT’s loans are at fixed rates, with an average cost of debt at 2.62%.

It’s shares currently have a Net Asset Value of S$1.56. A dividend yield of 7.4% rounds up it’s dividend payout, based on a share price of S$1.18.

Our Opinion

CLCT intends to diversify into “New Economy” assets, in accordance with it’s new investment mandate. By 2026, the REIT intends to have 30% of it’s assets respectively in retail and logistics, with the remaining 40% centered on integrated developments.

To achieve this, the REIT has been monetizing non-core assets, with the intention to shift into newer assets with higher growth potential.

It also benefits from having a strong sponsor in the form of Capitaland. With access to a pipeline of high quality assets, the REIT has no lack of opportunities for acquistion.

Barring any unexpected surges in COVID-19 variants in China, We’d expect the REIT’s metrics to continue to improve. In the meantime, investors will be rewarded with a yield of 7% for waiting. Not a bad deal in our humble opinion.

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