Tuesday, 6 October 2020

Why Did CRCT Share Price Increase By More Than 5 Percent In The Last One Week

CapitaLand Retail China Trust (CRCT) – Stock Code: AU8U

Source: https://www.crct.com.sg


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. 

Read: CapitaLand Retail China Trust (CRCT) – Why it is a Dividend and Growth Gem & Why It Is Greatly Undervalued Compared to the Rest of SGX REITs and Trusts?

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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This blog and its contents contain the opinions and views of the author. It is intended to be used and must be used for informational purposes only. The author cannot guarantee the accuracy of the information contained herein the blog and its contents. You should independently research and verify, any information that you find on this website. The contents of this website is not a recommendation to buy or sell the stocks of any of the companies or investments herein discussed. It is very important to do your own research and analysis before making any investment based on your own personal circumstances. Consult a professional if needed. 


7 comments:

  1. Hi, lately I have been looking at CRCT as well. I think it is an attractive stock, given its strong properties and management, low valuation, and China being relatively safe from covid-19.

    However, I learnt that ecommerce is quite popular in China and takes up quite a % of retail sales. As Singaporeans, we may not be able to know the local retail scene that well. Are you in any way concerned with, or keeping a watchful eye on that?

    Would like to know your opinion :)

    ReplyDelete
    Replies
    1. Hi FYY,

      Thanks for dropping by.

      E-commerce will become popular in SG too, or do you reckon it will not?

      I do know many China friends. They too love to go out of their house, because they too does not have the luxury of a big house and love to catch up with friends and walk the family in the mall.

      E-commerce will disrupt the entire world, and not just China. Malls will have to adapt, and I believe they will! For eg. F&B, education, children’s playground, supermarket etc.

      Anyway, CRCT already mentioned about the expansion strategy, and hence future assets will not be limited to retail!

      To answer your last question, I am not concern and mostly looking at the bigger picture China’s potential, and how Capitaland is already pretty established in China.

      Even, I can visit SG Malls, it does not mean I can be successful in investing in a local REIT. For e.g. you will not visit Keppel DC Reit or Mapletree Industrial Reit frequently or perhaps will never ever visit them. So does that mean that you SHOULD NEVER INVEST in these companies even if they show future potential and good metrics now?

      Just food for thoughts and hope it helps. End of the day, you should invest what you are comfortable with, else emotion will overcome faith and when that happens, normally the investment will be less successful.

      Delete
  2. Ur favourite CRCT recently price keep going up. So your paper gain now big green right? Haha

    ReplyDelete
    Replies
    1. Hi Vince,

      Short term paper value is up and down. Does not mean anything if we do not sell.

      Investors who feel happy when stocks go up in paper value will naturally feel equally sad when stock tumble.

      I rather have a hardened heart, and be less bothered.

      Nonetheless, I did buy more if I feel that price is too cheap for its value, and also when compared to peers!

      Delete
  3. I remembered I was in the plane and the air- stewardess handed me a newspaper two years ago. IN the same paper, I read that Mapletree Industrial Trust (MINT) expanded its investment mandate to include Data Centres in the USA. I told myself,... MINT would have performed the study prior to initiating this, hence, it would be good for me to enter MINT now. Which I did.

    The rest of the events, as we all know,... has bode well for MINT subsequently (and for me too) after this expanded mandate.

    I will be applying the same investing concept which I have earlier applied to MINT, over to CRCT today.

    CK Lai

    ReplyDelete
    Replies
    1. Hi CK, thanks for the sharing. I agree with you to apply the same approach to do something that you were previously successful in, is no brainer.

      Like you said, today the share price rose again. But then, let's wait for two years later to confirm if it is same as MINT. Hopefully it will be!

      Delete
    2. Tq Rolf for replying,.. I loaded-up on CRCT between Oct 1st and Oct 6th,... prior to the release of the analyst reports of DBS. I hold my confidence for CRCT after this mandate change.

      CK

      Delete