OCBC Investment Research has kept its "buy" call and $1.38 fair value estimate on CapitaLand China Trust (CLCT), with a view that shopper traffic is improving and that the REIT's overall business is undergoing a recovery.
"We continue to see CLCT as a beneficiary of China’s reopening and pro-growth policies," states OCBC in its April 26 note.
CLCT owns a portfolio of 11 retail malls in China, 5 business parks and 4 logistics parks.
CLCT, in its 1QFY2023 ended March business update, says that shopper traffic improved 10.6% y-o-y. Overall tenants’ sales rose 15.4% y-o-y, reaching around 95% of pre-Covid levels with some of the malls within the portfolio even surpassing. Overall, retail occupancy increased from 95.4% in 4Q22 to 96.4% in 1Q23.
As of Mar 31, the occupancy rate of business parks dipped by 1.6 percentage points (ppt) q-o-q to 89.8% while logistics park’s occupancy fell slightly by 0.8 ppt q-o-q to 95.6%.
OCBC notes that leasing activities picked up in Mar 2023 and CLCT targets to capture new demand and tenant space expansion in engineering, electronics, biomedical trade sectors.
"As China reopens, we could see continued improvement in the retail segment in the coming quarters.
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"Management expects its retail portfolio to register positive rental reversion in FY23, aided by its asset enhancement initiatives while logistics park and business parks could remain resilient," says OCBC.
