CapitaLand Retail China Trust (CRCT) – Stock Code: AU8U
Shares of CRCT fell to ten year low of SGD1.10 last week, if we disregard Covid-19 March slump of SGD0.92. The price had plunged more than 50 percent since YTD peak in January 2020. This is in spite of China’s fast economic recovery from the pandemic. No doubt shoppers’ traffic and tenant sales are not yet to pre-Covid levels, BUT they are expected to improve in 2H2020.
Therefore, I had been accumulating CRCT shares in the last two months, as I feel that CRCT is greatly undervalue. Earlier in August, I had also cited several reasons why CRCT is attractive.
Some of the reasons of my “buy” stem from good financial metric compared to other SGX REITs; positive growth outlook of China focusing on local consumption; and why the leasehold status of CRCT is of little concern.
Over the last few days, CRCT shares have been steadily increasing and closed at SGD1.17 today. This is likely attributed to the recent announcement of “expanded strategy”.
Quoted from CRCT’s announcement:
“CRCT is a Singapore-based REIT established with the objective of investing on a long-term basis in a diversified portfolio of income-producing real estate and real estate-related assets in China, Hong Kong and Macau that are used primarily for retail, office and industrial purposes (including business parks, logistics facilities, data centres and integrated developments).”
With the expanded investment strategy, CRCT will be better positioned for growth as it will be the dedicated Singapore-listed REIT for CapitaLand Group’s non-lodging China business, with acquisition pipeline access to CapitaLand China’s assets.
CRCT will also be able to gain exposure to an expanded universe of third party assets of various asset classes that CRCT would independently source and identify. This will allow CRCT to seize new opportunities in the growing China real estate market and enhance the Manager’s ability to provide long-term and sustainable returns to Unitholders.”
3 Key benefits as stated in the announcement summarised as follows:
- Expand Investment Opportunities: To explore other asset class beyond retail sector.
- Sector, Revenue Stream, Asset and Tenant Diversification: To have a sector diversified portfolio to reduce risk of sector concentration
- Enhance Ability to Deliver Stable and Sustainable Distributions to Unitholders: Different asset classes have varying cycles of rental growth, occupancy rates, and other market specific risks. A diverse portfolio will provide CRCT with a more balanced and stable rental revenue for sustainable distributions.
CRCT has a 5.6 percent dividend yield at current price based on 2020 DPU.
Will the stock continue to rise or fall?
PS: I own stocks of CRCT at the time of writing.
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