What are some of your thoughts on the future of CAPITALAND limited, CAPITALAND commercial trust and CAPITALAND mall trust as we prepare to enter phase 2?

Question

Billy Ko · Accepted Answer

As the name suggests, Capitaland would be the main sponsor towards the 2 REITs - Capitaland Commercial Trust - CCT (which specialises in Commerical offices) and Capitaland Mall Trust - CMT (which specialises in Retail Malls)

++Capitaland Mall Trust++

As opposed to what DC mentioned, although it is true that there is going to be an increased foot-fall in malls, it does not equate to increased performance of CMT. One must understand what is the main revenue driver of these stocks. If these 3 stocks earn directly from the number of traffic to the mall, then yes, absolutely. However, Capitaland Mall Trust earns from **RENTAL** income and with rental waivers until the end of this month and an increasing number of stalls having permanently shut, it remains to be seen how much these stalls contribute to CMT's rental revenue.

++Capitaland Commercial Trust++

Similarly for CCT, should tenants of Commerical Offices have issues paying rent, they are able to seek for rental suspension / relief through the COVID-19 (Temporary Measures) Act which is in place for a period of 6 months (starting April) . And with government prioritising WFH, it may take a while for rental income to be reverted to the norm for CCT.

++Capitaland Limited++

Capitaland is more diversed geographically and sector-wise due to it's portfolio. One must assess the impact of each market + industry that Capitaland is in and how long it'll take to recover i.e. Property Sales / China reopening. There are many factors involved.

Nonetheless, all 3 stocks are trading close to 20% below pre-COVID-19 prices. Time will tell how and if we ever reach back those prices

d c · Answer

In my opinion, the future of the above stocks are positive. Even though many people are staying home now due to covid, there are still people frequenting malls.

Afterall, malls provide a common space for friends and family to meet and dine together, which is something that cannot be replaced by technology. There are also people who would rather buy products in-store, as opposed to ordering them online (think about spectacle shops, clothing shops, daiso etc...)

TLDR; I have faith in Capitaland!

j · Answer

Generally, as one of Singapore's blue chip, Capitaland Limited has a strong balance sheet and extensive property listing throughout Singapore. And Capitaland Mall trust have quality shopping malls at MRT junctions that remains highly attractive, whereas Capitaland commercial trust may face greater disruptions with remote working diminishing the need for office leases in the future.

In view of Phase 2, where citizens are able to return to malls, some workers back to offices but with travel mostly restricted within Singapore, it is likely that crowd volumes would return during the weekends over time. Hence, even if sales have shifted online, the footfall at physical storefronts would not be as adversely impacted.

However, it is important to consider the impact of rental waivers that the government has set in place. The waiver of property tax can cushion and delay the impact of the fall in profitability temporarily, however the effects are to be seen in the long run. With smaller SMEs declaring bankrupt or international brands pulling out of Singapore, the rental income for capitaland is likely to be negatively impacted. Nevertheless, these assets remains valuable being at prime location, and competitive storefronts. Also, with the merger of Capitaland mall trust and commercial trust, this will seek to increase synergies and minimise costs, while giving Capitaland a larger market share. Hence, this remains attractive (personal opinion! please do your own due diligence)

Jovan Lai · Answer

Hi there,

I think most assume its a good thing for shareholders of both side but it may not be as simple as that.

With the merger, the combined new company has to take on the debt and liabilites of both side. Of course it benefits from being able to utilise assets from both sides.

Another point is that 1 is a retail REIT and the other is a commercial REIT, it changes the fundamentals of the company should they merge.

Ultimately, study both companies and have a good understanding of both sectors instead of assuming they are the same because they are both REITs.