Capitaland China Trust ("CLCT") is a China-focused REIT that I have been holding on for about 2 years. It was memorable for me as I bought it in different tranches (the first 2 tranches at crazy high price). The first 2 tranches were bought in September 2019 and January 2020 respectively (under my Margin Account) while price per unit were at an all time high before the pandemic struck at around S$1.55 per unit before the price collapsed and I nearly had a heart attack. But I still held on to it as I believed the China growth story and that China will be one of the first country to walk out of the shadow of COVID. The other huge tranche was bought at one of the lowest point during the depressing month of March 2020 at S$1.12 per unit. I was lucky to have picked up a substantial tranche then. Recently, CLCT finally announced a higher partial restoration of its distribution per unit (DPU). On an enlarged unit base, 1H 2021 DPU rose 40.1% to 4.23 cents, compared with 3.02 cents for 1H 2020. This represented an annualised distribution yield of 6.04% (based on unit price of S$1.40 as at 30 July'21) with further upsides from the upcoming economic recovery in China.
1. Key dividend distribution date to take note- Ex-dividend date is on 5th August 2021 to qualify
CLCT’s ex-dividend date is on 5th August 2021, and Unitholders can expect to receive their 1H 2021 DPU on 27 September 2021. So for those who are interested in CLCT, you have up to Wednesday (4th August) in the coming week to get some units if you want the dividends. Historically before COVID, CLCT's distribution yield hovers around 6.5% to 7%. I will also elaborate more on 2 other things to take note of below.
2. Investing in a "rojak" mix of assets.
CLCT used to be focused only on China retail shopping malls. However since a change of mandate in September 2020, CLCT announced that it will also invest in office and industrial estates. This can thus also include business parks and data centres. Subsequent to the expansion of investment mandate, CLCT has acquired 5 business parks from its sponsor.
CLCT used to be focused only on China retail shopping malls. However since a change of mandate in September 2020, CLCT announced that it will also invest in office and industrial estates. This can thus also include business parks and data centres. Subsequent to the expansion of investment mandate, CLCT has acquired 5 business parks from its sponsor.
I am not sure whether this is good or bad idea to have a "rojak" of assets. Apparently, this is the current trend. In the past, the trend is for business to crave out part of its segment for IPO to become a pure specialist of a certain class of assets and to bring about fair valuation being realized to its stock price. I guess in another few years, management may decide that the REIT is too large to manage and best to segregate the assets and spin them into another IPO. Afterall, running retail and industrial properties are actually very different. Either strategy type has its own pros and cons. It depends on the mood of the moment perhaps...haha...I just find it funny and cannot help myself thinking of these financial engineering of capital going on behind.
It will also be interesting if CLCT starts to focus on acquiring data centres in China similar to Keppel Data Centre REIT which will boost up the resiliency of its earnings.
3. Risk of increasing COVID-19 Delta Variant Outbreak and the Effectiveness of Sinovac vaccines
The Delta variant proves itself to be fit and effective in spreading widely. It is as contagious as chicken pox. China just had another outbreak of COVID. As per the Global Times, China fully vaccinated rate is 53% as at 22 July 2021. This is one of the few highest vaccinated countries in the world. The real world experiences by countries such as in Thailand and Indonesia seems to illustrate that Sinovac may not be as effective as Pfizer and Moderna. However, it has been proven that Sinovac at least works well against severe illness and deaths from COVID. Hence as long as the vaccination rate is high, it does not matter and will bring the raging beast under control and for the economy to function without drastic lock downs once herd immunity has been achieved. There maybe some hipcups on and off till that target is achieved by year end.
3. Risk of increasing COVID-19 Delta Variant Outbreak and the Effectiveness of Sinovac vaccines
The Delta variant proves itself to be fit and effective in spreading widely. It is as contagious as chicken pox. China just had another outbreak of COVID. As per the Global Times, China fully vaccinated rate is 53% as at 22 July 2021. This is one of the few highest vaccinated countries in the world. The real world experiences by countries such as in Thailand and Indonesia seems to illustrate that Sinovac may not be as effective as Pfizer and Moderna. However, it has been proven that Sinovac at least works well against severe illness and deaths from COVID. Hence as long as the vaccination rate is high, it does not matter and will bring the raging beast under control and for the economy to function without drastic lock downs once herd immunity has been achieved. There maybe some hipcups on and off till that target is achieved by year end.
Parting thoughts
CLCT has a well seasoned team operating in the China market for many years. The growth prospect is enormous for the REIT as there are S$33 billion worth of assets in its pipelines from its sponsor Capitaland in China. Also, the brand name and the support of the Singapore government will always be there. If there is any crisis, the deep-pocket of its sponsor will always be there to pick up tab in equity raising to ensure business continuity. Weak sponsor are unable to provide cash injection during financial crisis which can lead to the fire-sales of assets and investors not getting a single cent back. The pandemic has illustrated the importance of sticking with only honourable sponsors who are financially strong especially during such dire times. 留得青山在, 不怕没柴烧！
My only concern is the short land lease of its assets.
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