Flashnote: Capitaland Mall Trust Westgate Acquisition Update & 3Q Results

It was a busy news day for Capitaland Mall Trust, with the REIT reporting their latest quarter of results and launching a private placement to raise funds for the Westgate Acquisition. So I thought I’ll give a quick review of each piece of news.

Check the 3Q results and Private placement announcements for more information.

Third Quarter Results

Capitaland Mall Trust posted a pretty decent set of results for the third quarter of 2018. Here are the highlights per the announcement:

Revenue and DPU

3Q DPU

3Q NPI

Source: Capitaland Mall Trust 3Q 2018 Results Announcement

DPU reached 2.92 cents in the quarter, up from 2.81 cents in 2Q 2018, partly due to $4 million released to unitholders which was retained from 1H 2018 performance.

Financial Indicators

Financial Indicators

Financial indicators remain healthy with relatively low leverage and good interest coverage. Leverage is likely to rise to 34% as explained later.

Rental Reversions

3Q Rental Reversions

Rental Reversions refers to the increase / decrease in rental rates once new leases are signed for the respective properties. Overall a slight positive of 0.6% positive rental reversion across the portfolio. Interesting to see the negative rental reversion and low retention rate at Westgate, a property they will be acquiring the remaining interest of really soon.

Overall an acceptable set of results and looking forward to the distribution receipt in November.

Westgate Acquisition Update and Private Placement

As predicted in my previous post on the acquisition, the acquisition will be funded by a mix of debt and equity – through a private placement. Based on the private placement details, it seems like they have gone for highest amount of equity modeled for in the EGM circular (70% LTV).

Funding details

Funding raised: At least $250 million with $25 million upsize option
New units: 122,011,000 units
Issue price: Between $2.049 and $2.097

Update @ 26 Oct: 134,089,000 units was ultimately issued at $2.07

Gearing Comparison

DPU Comparison

Source: Capitaland Mall Trust EGM Circular

Based on the above illustrations in the acquisition circular, the acquisition is yield accretive / neutral. However, do note that the illustrations were determined based on the unit price of $2, which is lower than the unit price range. This means that the acquisition is definitely yield accretive now as the REIT is issuing about 500k less units than illustrated. So that is definitely good news.

Update @ 26 Oct: The $25 million upsize option was exercised resulting in 11 million extra units being issued. This means that this private placement was ultimately slightly yield destructive, but it results in a slightly stronger balance sheet.

Advanced Distribution

As part of this private placement, an advanced distribution has be declared as well. It is currently guided to be 1.38 to 1.48 cents, so when added to the 2.92 cents declared for 3Q 2018, a Cumulative dividend of 4.30 to 4.40 cents is expected to be paid out.

Final Thoughts

I’ve been rather satisfied with my purchase in Capitaland Mall Trust since April and its good to see management making shareholder friendly acquisitions and funding decisions. Will look forward to seeing the rest of the reporting season play out for my other investments.

Happy Hunting,
KK

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