The REIT that gave me a +34% return (C38U)

Currently, C38U is at a price of $2.05. This REIT has been holding its ground relatively well and has experienced a bull run recently as well.
At a conservative dividend yield of 4.85%, I would like to explore whether this REIT is still worth it at this price. I will lay out the numbers at the front. You can read my reasoning and my price that I bought at the end.

Property Value

CMT owns a huge number of top tier malls in Singapore at prime locations. Personally, living in the West, I frequent Lot One and IMM a lot. When I go to the central part of Singapore, Bugis+ and Plaza Singapura also tends to be one of the many hotspots. The recently opened Funan mall also has a lot of potential to drive in revenue as it is a shop made for technology geeks, camera enthusiasts without neglecting a wide selection of food. In total, this leads to a market capitalisation of S$9.7 billion.

Backed by one the better sponsors available, Capitaland, this REIT also owns an 11% stake in CapitaRetail China Trust (SGX: AU8U), the first China shopping mall REIT listed in Singapore.

Occupancy Rate

This REIT also manages to boast a high occupancy rate of 98.5%. Although the worst is yet to come (Q2 2020), this is still a sigh of relief for most investors.

Gross Revenue and Net Property Income

Despite the COVID-19 scare, C38U has performed fairly well in the first quarter of 2020. They have generated a gross revenue of S$204.3 million, which boasts a 2.2% year-on-year increase.

In addition, they enjoyed a 5.9% rise in net property income from 140.1 to 148.3 million.

Compared to their past years, this has been relatively consistent as their growth percentages hovered around 4%. This is a good sign of a good management as well as solid retail spaces.

Distribution Per Unit

Before COVID-19, C38U’s DPU has been consistently increasing, which is attractive for most dividend-chasing investors. However, in the first quarter of 2020, they faced a drop in DPU by 70.5%, which amounts to 0.85 cents.

According to their financial report, “for 1Q 2020, in view of the uncertainty and challenges brought about by the rapidly evolving COVID-19 pandemic, CMT had retained S$69.6 million of its taxable income available for distribution to Unitholders. In addition, capital distribution of S$4.8 million for the period from 14 August 2019 to 31 December 2019 received from CapitaLand Retail China Trust (CRCT) in 1Q 2020 had been retained for general corporate and working capital purposes.”

This shows a prudent and good manager behind the REIT. Understanding the risks of the current economic headwinds and staying conservative while not allowing stakeholders’ negative sentiments to affect their decisions is not an easy task. I would rather have a more conservative manager behind the REIT who consistently churns out strong financial sheets than one which succumbs to pressure and continues providing sky-high but unsustainable dividend yields. They have taken into account the scarier times ahead (Q2/Q3 2020) for the retail side.

Property Yield

For 2019, CapitaLand Mall Trust’s property yield stood at 5.4%, which is good.

Gearing Ratio

C38U has a gearing ratio of 33.3%, a slight increase from Q4 of 2019 (32.9%). However, way below MAS’ limit of 50% and pre-COVID-19, 45%.

Another indicator of a prudent management.

General Prospects 

C38U has recently renovated Funan mall, into a very nice shopping heaven for tech geeks. They have also divested from Rivervale mall, showing that they are consistently on the lookout for poor investments and ready to divest.

Along with the small ownership of CapitaRetail China Trust, giving you some geographical diversification and the fact that China has already lifted most restrictions, it is no wonder that this REIT remains a favourite among investors even during these times.

C38U has also shown that they are committed to help tenants. Although not directly beneficial to us investors, it can help us indirectly if their tenants can ride through these tough times. In the long run, they will stay and provide timely rental payments.

Acceptable Price-to-Book Ratio

Currently, C38U has a PB ratio of 0.97, which is okay.

I believe a stronger time to invest would be a month ago, but if you remain bullish and optimistic about this REIT (like me), you should enter the market and hold your stock forever.

Personal Take

Portfolio tracked by

As a long-term investor, I see the short-term weakness, including any DPU cuts, as a rare opportunity to have a larger stake in a well-managed and resilient REIT. This is why I strongly believed in this REIT despite the bear market earlier in the year. I vested a strong position in the REIT and have now received considerable returns of +34% as of 10 June.

For now, the PB ratio remains reasonable. If my weightage was not already so high, I would average up my holdings. However, CMT currently takes up 30% of my portfolio. I hold strong conviction in this REIT and the recent bull run has proven to be profitable for me.

Merger with Capitaland Commercial Trust (C61U)

The Fifthperson made a really good article comparing the pros and cons of the merger to form CapitaLand Integrated Commercial Trust (CICT).

Other than the fact that CMT holders will be buying “buying” CCT trusts at a premium, this merger proves beneficial for both holders of CMT and CCT. In fact, it will results in the third largest REIT in the Asia-Pacific region and will lead to more room for overseas developments. I project the PB ratio of this integrated REIT to go even higher at that point, becoming even more overvalued. Thus, if you are a firm believer like me, now is a decent time to enter the market for CCT/CMT.

With its AGM coming on 23 June, I will attend it (virtually), and give more of my thoughts and updates about the REIT soon.

What others say

You can read Seedly’s review (I really like Sudhan’s REIT analysis) here.

If you have your personal analysis of the REIT and want to be included, you can contact me.

Disclaimer: Do your Own Research

My content is intended to be used and must be used for informational purposes only. It is very important to do your own analysis before making any investment based on your own personal circumstances. You should take independent financial advice from a professional in connection with, or independently research and verify, any information that you find on our Website and wish to rely upon, whether for the purpose of making an investment decision or otherwise.


  • Vince

    Seedly post on REIT analysis is easy to understand to beginner, despite it only cover very basic info. I believe you can do more in-dept analysis. For a start, can analyze its lease profile (besides only occupancy) and debt profile (besides only gearing). Subsequently, you could look more into its diversification profile.

    REIT analysis is often viewed as simple/easy task by many and in-depth analysis for reit is deemed not necessary in a lot of time. In fact, reit analysis is very underrated in my opinion. An in-depth reit analysis would take more than 10 criteria mentioned in Seedly post, and analysis is not just a simple “yes” or “no”.

    • Junior

      Yes! I have some stuff in my personal notebook but I have held back on that for now because I feel like I should tidy it up a bit more. I will probably give an updated post after the AGM. Thanks for the feedback anyways 🙂

Leave a Reply

Your email address will not be published. Required fields are marked *