Doubled Up on Capitaland China Trust

CapitaMall Xuefu, Harbin, China

My order for Capitaland China Trust (CLCT) shares is filled today.

This effectively doubled up my small initial position in CLCT to 10,000 shares.

The share price of CLCT has tanked in recent weeks and has been on a poor bear run by diving more than half from the high of $1.65 before the onset of pandemic in 2020 to hit a 52-week low of $0.74 today.

As the largest China-focused REIT in Singapore, CLCT is facing strong headwinds in China's economy, including slowing growth and lingering impacts of its previous zero-COVID policies. High debt levels among many Chinese property developers have fueled anxieties about the sector's stability, spilling over into the REIT market as institutional investors worry about the health of properties that CLCT hold. Prolonged high interest rates and depreciating RMB versus SGD dollar only serve to exacerbate the fears of investors in CLCT.

Even though CLCT seems like junk now, it is crucial to remember that REITs like CLCT can offer immense long-term potential as its fundamentals never change. CLCT reported higher revenue and net property income in the latest financial results and is able to deliver 3 cents of dividends on enlarged unit base, higher expenses and unfavourable forex rates.

At a share price of $0.75, assuming a dividend of $0.06 for 2024, it yields around 8%. With a book value of $1.21, it is trading at 38% discount. A crisis breeds opportunity. CLCT has become too attractive and undervalued for me to ignore as I smell a great opportunity for me to lower my investment cost and rideout for a possible turnaround in its fortune and fate.

This will be a long-term value, recovery investment play for me. CLCT is not just a major retail player in China but has added business parks containing industrial properties, logistics warehouses and data centers to its portfolio in 2020. Investing in CLCT is one way to ride on the turnaround of China's economic environment as its government has introduced stimulus measures to stabilise the property market recently. Besides, the retail malls owned by CLCT have recovered from increase in tenant sales and shopper traffic to pre-pandemic levels 

I am not too concerned about the volatility of its share price in the short term. I am happy and patient to wait out at 8% yield and sitting on a diversified, heavily discounted portfolio of China's retail, industrial and logistics property assets.

Thanks for reading.

With Love & Peace,

Qiongster