Half Year 2026 CapitaLand China Trust Earnings Call
Speaker #1: Good morning, everyone. Welcome to CLCT's 1226 Financial Results Analyst and Media Briefing. I'm Hui Shi, investor relations for CLCT. I have with me today Jerry, CEO; Ling Tong, CFO; and Yo Hong, Head of IPM.
Speaker #1: Thank you all for joining us today. For this briefing, we will start with a brief presentation followed by a Q&A session. Once the presentation concludes, we'll open the floor for questions.
Speaker #1: So if you have a question later, please use the raise-hand feature and I'll pass on the time to you. With that, I will now pass the time to Jerry for his presentation.
Speaker #1: Jerry, please.
Speaker #2: Thank you, Hui Shi. Welcome, everyone, to CLCT's first half, 2026 Results Presentation. Thank you for making the time. To attend our presentation this morning, together with my team, I will cover our results and at least some time for Q&A later.
Speaker #2: For those of you who don't know us, of course, CLCT is the first and largest China-focused SRE we have a diversified exposure to China's domestic growth, and we uniquely offer connectivity to both SRE and CRE markets.
Speaker #2: Our total assets for first half 2026 is $4.6 billion, that is $100 million increase from first Q due to stronger renminbi. We have 8 retail malls, 5 business parks, 4 logistics assets, in predominantly Tier 1 and Tier 2 cities.
Speaker #2: Distribution yield based on trailing 12 months as of 30 June is 7.4%. WeTier is the largest and most resilient asset class at 70% of gross rental income.
Speaker #2: Our bread and butter malls continue to be defensive and benefits from government initiative to boost domestic consumption. Our new economy assets, business parks, and logistics parks form the smaller part of our portfolio at 30%, providing us exposure to China's efforts to grow technology and innovation, including key sectors like semiconductors, electronics, and ICT.
Speaker #2: First half financial highlights: financial performance-wise, our gross revenue is $822.6 million renminbi, NPI 561 million renminbi, and DPU is 2.45 Singapore cents. Retail operations continue to be defensive with high stable occupancies, positive sales and traffic with slight negative reversion, more AEI effects start to show fully in our numbers.
Speaker #2: Capital management efforts continue to buffer operations and with stronger renminbi trends, which appreciated about 4% over the last 1 year. We see benefits to gearing, cost of debt, and DPU.
Speaker #2: On the same stock basis, on this slide, you can see that our first half 2026 DPU of 2.45 cents outperformed first half 2025 by 2.9%.
Speaker #2: This is stripping out the contribution of the divested capital mall you're watching. Asset in first half 2025. On the gross basis, despite being one asset short for CLCT, our first half 2026 DPU of 2.45 cents is close to the first half 2025 DPU of 2.49 cents, a slight minus 1 point 6% decrease.
Speaker #2: In terms of portfolio gross revenue and NPI, gross revenue dropped 5% and NPI dropped 3%, respectively, year on year. Encouraging and building on first Q trends, on same stock basis, our portfolio gross revenue is marginally negative at minus 0.2%, and our NPI increased by 1.3% year on year.
Speaker #2: For retail, revenue declined by 6.2% on same stock basis, it increased by 0.8% year on year, an improvement versus first Q trends. We're watching itself we've been talking about we're watching just to inform the revenue contribution in first half is 43 was 43 million renminbi, NPI was 26.7 million.
Speaker #2: Now, improvement from our retail and our retail malls was due to revenues from our more AEIs. So for first half of this year, you know the revenues that flow through contributed extra 10 million renminbi.
Speaker #2: And the improvement was also due to some security deposit provisions. These were somewhat offset by continuing witness some of our retail malls, Xingnan, GCM, and Idaho Mountain.
Speaker #2: Business park revenue and logistics for first half revenue dropped by 2.7% year on year. We had improved occupancy at Shanghai Fujian Logistics Park, that offset by lower performance at Hangzhou Business Park Cluster, and lower rents entered in prior periods flowing through at some of the other logistics parks.
Speaker #2: To buffer some of the operational weakness of our new economy assets, we continue to focus on cost reduction. For first half, on same stock basis, we reduced operating costs by 3.5% year on year.
Speaker #2: We also aggressively utilized capital management opportunities to cut down interest costs by 16%. That's about $5 million for this half. And we'll continue to look for such opportunities in the second half.
Speaker #2: Retail operations trends: for first half, our traffic grew 3.2%, tenant sales grew 2.6%, both steps are faster than full year 2025. Even though second Q 2026 moderated retail sales-wise.
Speaker #2: Overall healthy occupancy costs at 17.5%. For retail sales, the trade caps that have done well F&B plus 3.5%, that's the biggest trade cap for us by retail GRI.
Speaker #2: It's driven by introduction of it's driven by, you know, the good performance of established brands like Haidilao and Haiti, which had good double-digit growth, as well as continued strength from Japanese sushi chains and bakeries.
Speaker #2: IT did well as well, plus 5.1% tenant sales-wise, and this benefit from demand for consumer electronics, as well as expansion of more digital brands due to our AEI in Sheffield, Wang Jing, to cater to the evolving consumer demand.
Speaker #2: Brands that have done well for example are like Huawei. And some of the other electronics providers. Sporting goods and apparel, plus 34.9%. This is driven by expansion into this growing sporting and outdoor trend lifestyle trend in China.
Speaker #2: For example, the Catalon in Rock Square and Anta Guan Chin in Sheffield, opened in fourth Q 2025 and has started to contribute strongly to our first half 2026 tenant sales.
Speaker #2: Toys and hobbies continue to be popular, plus 42.6% this half. Again, strong double-digit growth from Pop Mart and Miniso. Supermarket search very strongly, for us, as we have completed three supermarket upgrades last year, and their tenant sales fully benefited us this half of 2026.
Speaker #2: So as you can see in the slides, the three supermarkets delivered a very good tenant sales when they opened, and they delivered material traffic growth across the mall.
Speaker #2: And we are very happy with the results of the supermarket transformation that we have done in the three malls: Wang Jing, Cedarman, and Sheffield.
Speaker #2: There are other on top of this trade sectors, of course there are other trade sectors that tradition that in last year and prior quarters have not done so well.
Speaker #2: Fashion, for example, and building and health. I'm happy to report that we see generally speaking the rate of decline for these two categories have basically evened out or basically become narrower.
Speaker #2: Right? In fact, for fashion, I reported in first Q, that it has started to turn, and for the whole of first half, we are just slightly negative.
Speaker #2: Right? In terms of fashion sales, for building and health, overall the trend has been that the sales performance have been flat. Right? That's to be compared to prior periods where their performance has been negative.
Speaker #2: So generally, we see a good trend going forward. Hopefully, it will continue. For retail occupancies, our malls have been resilient, with high retail occupancy of 97%, with almost all malls above occupancy of 95%, except for Xingnan.
Speaker #2: Which we are trying to reposition. In June, Nu Homula introduced Yonghui Supermarket, which is a new concept store, as a replacement supermarket tenant. Featuring an enhanced product and shopper experience.
Speaker #2: The store achieved sales of 8,500 per square meter in its first week, reflecting strong consumer demand and market reception. Retail reversion overall, it's at minus 2.7%.
Speaker #2: At similar levels to full year 2025, with two anchor tenants affecting our reversions. For business parks, our overall occupancy is at 85.1%, which was a drop from first Q 2026, with weakness in Hangzhou and AIT, Ascenders Innovation Ascenders Innovation Towers, in Xi'an.
Speaker #2: Our business parks generally outperformed their submarkets, despite the general soft leasing environment for the business park market. AIT's occupancy drop was mainly from BPO tenants, which did not renew upon expiry, but Hangzhou cluster has been a challenging market supply-wise.
Speaker #2: Occupancy has dropped slightly, but still above the 70% mark. Overall, business park reversions are at minus 12. We prioritize occupancy through active retention of existing tenants and conversion of our listing pipelines.
Speaker #2: So in first half, we managed to sign 102,000 square meters of renewals and new leases. So we did a lot of new leases. But of course, the competition is fierce.
Speaker #2: And we noted that there has been an increase in terms of tenant mix from the electronics and engineering tenants. For logistics, these are our smallest part of our portfolio at 3%.
Speaker #2: Our logistics portfolio, we reported in first Q, continued with the same trend, stabilized at full occupancy. Retail reversions have basically negative retail reversions have narrowed.
Speaker #2: To now minus 1.2. If you recall, you know, in 2025 it was in the minus 20 sort of region. So it's truly we think that it has truly bottomed in terms of rents, and our retail and our logistics business have stabilized.
Speaker #2: Next, I will let Lingtong take through the capital management part, Lingtong.
Speaker #3: Okay. Thanks, Jerry. Capital management actually remains as a core strength and priority for CLCT. So we maintain a healthy balance sheet and actively lowering our cost of borrowings.
Speaker #3: And that actually protects the distribution stability across FX and interest rate cycles. So I'm happy to report that as at the June 2026, CLCT's aggregate leverage has improved to 40.4%, from 42.1% one year ago is also an improvement from 41.4% in the previous quarter.
Speaker #3: So these are due to the renminbi appreciation and also our cross-quarter cash management effort. Due to currency demand from strong export in China and also PBOC's guidance on slow gains in the yuan, renminbi has appreciated as much as 2.7% in first half of 2026.
Speaker #3: Although we had earlier step up our natural hedge effort and did not enjoy the full positive pass-through from currency appreciation, this low 40% gearing has given us a full a very good base on our capital management.
Speaker #3: We are pleased to report that our year-to-date average cost of debt has also fallen to 3.06% in first half 2026. Average cost of debt actually has fallen to 3.06% in first half.
Speaker #3: Right? So this actually is 40 basis point reduction year on year. And also further reduction from 3.1% reported last quarter. Right? This actually translated to close about 16% interest savings, year on year, and these are tangible outcomes from our active finance cost management.
Speaker #3: And during the first half, not only we repriced some of our mortgage loans in China, we also proactively shifted our borrowings from Xing dollar to renminbi.
Speaker #3: And through that process, we captured additional savings by swapping our Xing dollar interest rate cash flow into renminbi. And because the swap market is actually has some favorable direction.
Speaker #3: Our trading 12-month interest coverage ratio is maintained at 2.9%. It's stable, and resilient under MAS ICR stress test scenario. So for CLCT, and we continue to manage our interest rate risk by maintaining a high 60 to 70% of debt on fixed basis.
Speaker #3: At this moment, interest rate curves are in our favor, so we can efficiently fix our interest rate in renminbi without paying up too much for the tenure.
Speaker #3: We also continue push for natural hedging and balance our Xing dollar and renminbi mix in the debt. To reduce the FX impact on our gearing and to our NAV, we're happy to report that we have actually aligned 37 sorry, 73% of our debt in renminbi as at 30th of June 2026.
Speaker #3: These are done through a good mix of renminbi direct borrowing as well as renminbi synthetic borrowing via cross-currency swap.
Speaker #1: Next page.
Speaker #3: Oh, okay. Great. So this actually slide shows our debt maturity profile. Remain well stacked. We do have a small refinancing, not done for 2026.
Speaker #3: That is FTZ bond, free trade zoom bond of renminbi 600 million. The current coupon that we are paying is 3.8%. So we are confident that we can refinance it for much below 3% and bring a very meaningful savings in interest expense.
Speaker #3: At this moment, we are working on various funding options. Meanwhile, we have undergone revolving facilities of close to 500 million Xing dollar from our banking partners.
Speaker #3: That could be used as an alternate refinancing solution. So let me wrap up on the capital management section. And CLCT is actively and prudently managing our debt structure.
Speaker #3: And we have actually delivered healthy balance sheet, lower cost of debt, and also a stronger resilience to the rate and interest rate movement. Yeah.
Speaker #3: So I will pass back to Jerry.
Speaker #1: Okay. Thank you, Lingtong.
Speaker #2: Thank you.
Speaker #1: So to summarize, our strategy, we have four pillars of our strategy: create value. So in 2026, we are targeting expansion into new retail assets to replenish the lost income of our Yuhua team.
Speaker #1: And we want to keep business parks and logistic occupancy stable. Unlock value, we will continue to identify and see whether we can unlock value from mature assets as appropriate.
Speaker #1: In terms of timing and in terms of pace. Extract value. Our track record and ability to identify and execute on AIs will be a key part of extracting values from our existing assets and for any new acquisitions that we do.
Speaker #1: Proactive capital management. Lingtong has explained we have aggressively stepped up the way that we do capital management. And we have driven interest cost savings through this efforts, including expanding renminbi debt access and reducing our FX risk where appropriate.
Speaker #1: And we'll continue to do so. With that, I'll pass it back to Huixin to see whether they can start the Q&A session.
Speaker #2: Thank you, Jerry, for your presentation. Now let us proceed with the Q&A segment. We have our first question from Terence. Terence, please go ahead.
Speaker #4: Yeah. Thanks, congrats, Jerry and team on the strong results. Yeah. Maybe two questions from me. First on interest cost. Wow. Very, very good numbers and pivot from Xing dollar debt to RMB debt.
Speaker #4: I guess the now we would like to I guess we would like to know what you expect for interest cost for the year. And especially with the refinancing of the FTZ bond and how much higher could we go on the RMB denominated debt.
Speaker #4: Second question on tenant sales. Tenant sales is up. Opt cost is actually stable. So when should we expect some uplift in rent reversions for especially for the retail malls?
Speaker #4: Yeah. That's it for me. Thanks.
Speaker #1: First question, I'll let Lingtong take second question. Maybe Yuhua can take it. Yeah.
Speaker #3: Okay. Thanks, Terence. Thank you for noting our efforts in finance cost management. Yes. So for last year, I think the we actually has embarked on this journey to actually pivoting more of our debt from Xing dollar to renminbi.
Speaker #3: So as you know, China is actually having quite a commoditive monetary policy. So renminbi rate as well as renminbi interest rate curve are not as steep.
Speaker #3: So that actually has put in put us in a very good position when we actually switch from Xing dollar borrowing to renminbi borrowing. Right.
Speaker #3: So our current renminbi denominated debt is 73%. So we will continue doing more of this refinancing effort. And so we are actually looking at keeping renminbi at the maybe like 70, 80 percent kind of level in our total debt mix.
Speaker #3: When our current FTZ financing, it is actually due in October 2026. Right. So like what I have just shared, we are evaluating various options.
Speaker #3: So at this moment, I mean, just to share that Xing dollar I mean, in terms of a cross-currency swap, there is actually a significant savings from Xing dollar to renminbi.
Speaker #3: Right. So the current that is actually because of a different stiffness in yield curve. So we are ready to actually take the opportunity to capture the these favorable favorable interest rate environment that is actually help us in terms of stabilizing DPU and to drive the growth for CLCT.
Speaker #3: So in terms of how much more we can do, I think we have actually successfully bring down from mid 3% to low 3%. So I think my I hope to actually maintain at the low 3% and hoping to actually report a 2% number in the near future.
Speaker #3: High 2% number. Yeah. Sorry.
Speaker #1: Okay. On the question on the sales and reversion, I think we have done well in terms of our portfolio. Partially due to the EI and also our active effort.
Speaker #1: However, I also note that the broader market retail sentiment remains to be cautious. So when we discuss with the tenants, I think they are not ready to or is resistant to rent increase.
Speaker #1: So generally speaking so I think from that point of view, we think it will take a while for the business sentiment to come back.
Speaker #1: So but we hope it's getting closer.
Speaker #4: Thanks. Maybe just a follow-up. Could we get a sense Lingtong, can we get a sense of what's the differential in the cost of debt for RMB denominated and Xing dollar denominated?
Speaker #3: Okay. Yeah. So this is actually a purely how to say derivative kind of maybe I take it from the derivative side. Right. So if I actually issue Xing dollar, right, and then I decided to actually swap into renminbi on fixed to fixed basis, right, let's say for five years, we could actually get the same of 30 to 40 basis point.
Speaker #3: Right. So that is actually the is the construct of the market at this moment.
Speaker #1: And effectively, what would that interest rate be?
Speaker #3: Okay. Just hypothetically, if we issue at the let's say Xing dollar at 2.5 2.5%, right, that will actually or rather 2.8%, that will actually be translating to about 2.4% in renminbi terms.
Speaker #3: I'm just a guide. Yeah.
Speaker #4: And this is fixed for five years. In that sense.
Speaker #3: Yeah. Fixed. Yeah. Fixed.
Speaker #4: Oh. Okay. Wow. Thanks. That's really very impressive. Yeah.
Speaker #3: Yeah. Window. So we will seek to capture that. Yeah.
Speaker #1: I think one of the main things is because generally the market has turned positive on renminbi. So the swaps are quite in our favor.
Speaker #3: Yes.
Speaker #4: Okay. Thanks.
Speaker #2: Okay. Thank you, Clarence. The next question is from Yuqiang. Yuqiang, please go ahead.
Speaker #4: Hi. Hi. Hi, Gary. Thanks for the good results. Just want to ask on MPI margins. Why is retail and business up business parts up so strongly?
Speaker #4: And why is logistics down so much? And then the second question is on the CLCR the second CLCR second C rate do you have an option to sell those assets to them?
Speaker #4: Would it be exit vehicle for you?
Speaker #1: Yeah. The MPI margin question, I'll let Lingtong take it. I think the question was the comment on MPI margins across the three sectors. Right.
Speaker #1: I'll take the second question after that.
Speaker #3: Okay. So one of the business parts increase, right, is actually last year, the urban year so there is actually a pre-termination of a master lease tenant.
Speaker #3: So we had to actually write off some of the revenue unfortunately. So those losses that was actually not it was actually happening last year, right, is not actually recurring.
Speaker #3: So that is actually has contributed positive variance year on year. Right. So our generally speaking, our operating margin is about like 67% for retail, right, about 70 to low 70% for business part, and then our logistics about 60% kind of level.
Speaker #3: So those has actually been quite consistent. Because most of our if you look at our cost structure, 30% of our costs are actually revenue pack.
Speaker #3: So it's actually a kind of a low fixed fixed leverage ratio kind of. Yeah.
Speaker #4: So for the next two years, your MPI margin for retail should be about 67, business part should be about low 70s, logistics about 60%?
Speaker #3: Yeah.
Speaker #1: Yeah. That's a general guidance that we will.
Speaker #4: Yeah. Because your logistics have never been in the 60s, right? It was always maybe 70. Percent in the past.
Speaker #1: So I think logistic also had the effect of because last year, I think versus this year, the revenue is lower because the rent reversion that we had last year.
Speaker #1: So while there are certain floating or rather revenue packed costs, I think there are also some in terms of say for example, maintenance, security, utilities, these are more or less more fixed.
Speaker #1: So the margin would have dropped a little bit so but then from this year, I think the revenue would have stabilized. We would also assume project that going forward, the margin would also be more stable.
Speaker #1: But if I look at if I look at last year, first half last year, actually our MPI margin for logistics was in the 60s.
Speaker #1: So I'm not sure where the 70s came.
Speaker #4: Oh. Like earlier years. Earlier years. Much earlier.
Speaker #1: Last year. Yeah. Maybe far earlier years, it may be higher. I mean, because the rents level was higher and I think we have reported in a few several periods that last year, year before last, the rent drops for logistics sector and business sector, I think, has been quite large.
Speaker #4: Okay.
Speaker #1: Okay. Then the second question, regarding CLCR, as you know, CLCR2, right, CLCR2, as I think you read, this is still an ongoing still an ongoing transaction and the reason that we did not participate is if you recall last year, we just basically divested one of our asset and ceded it into the first retail C rate together with the sponsor.
Speaker #1: So we felt that it was too soon for us to basically do another transaction. Right. We are, of course, still starting it. Our initial plan is to boost up our income levels first before we think about extracting value from any assets, whether it is retail business parts or logistics.
Speaker #1: If it turns out that if it turns out that after we have achieved our short-term goals and we find that there are assets that we want to monetize, right, the new C rate that the sponsor is doing, could potentially be one source of capital recycling channel that we can utilize.
Speaker #1: Since we are under the same group.
Speaker #4: And how would you differentiate between the first C rate and second C rate? Like if you have a business part or logistic to sell or retail more to sell, yeah.
Speaker #4: How would you decide between the two?
Speaker #1: Okay. I mean, this one maybe I let you, Hong, just describe the difference between the first C rate and the second C rate that the group is trying to do right now.
Speaker #1: Right. In detail. Yeah.
Speaker #3: Yeah. So the in terms of this second C rate, there is some slight, I would say, policy difference in terms of the one thing that is different is the speed.
Speaker #3: In terms of how the approval process and it's a bit shortened. Secondly, is also the sector is widened to not just the selected sectors but also include office, hotel, and whatnot.
Speaker #3: So in terms of selection of the vehicle, I think we are agnostic. To us, whichever vehicle that is best for our income.
Speaker #1: So for the first C rate, it was purely retail. The second C rate will be coming under scope.
Speaker #4: Yeah. But you don't have any hotels or anything like that, right?
Speaker #1: We don't have hotels. Yes. That's true.
Speaker #3: Not in the one, but I think it's in the broader policy-wise, it's allowed.
Speaker #4: Okay. So would it be fair to say if you want to divest the business part, you would only go for the second one, second C rate?
Speaker #1: At this moment, I would say.
Speaker #4: I mean, in terms of mandate and asset class.
Speaker #1: Yes. In terms of mandate, if you're talking about mandate, yeah.
Speaker #4: Okay. Okay. Okay. Thanks.
Speaker #2: Okay. Thank you, Yoo Kyung. We have the next question from Terrence. Terrence, please go ahead.
Speaker #4: Good morning. Terrence from UBS. The disclosure on slide 9, just thinking about auto mobile sales, I mean, just contrasting the 2.6% headline tenant sales growth versus it being higher if you exclude auto mobile sales.
Speaker #4: Is the following auto mobile sales a problem?
Speaker #1: I will let Yoo Hung add on, but I would say that maybe just to recap, I think a few quarters ago, we have checked that we have been trying to pivot away from EV tenants.
Speaker #1: We have sort of enjoyed the, I would say, the EV dividend. One leasing cycle ago, which is roughly about three years ago, when there was a proliferation of EV brands who wants to take up prime first of all, space in many of the malls.
Speaker #1: Right. And now, of course, EV brands have consolidated. So there's less demand for that. So we make some hard choices and we decided we're going to pivot out of many of those tenants, which we have.
Speaker #1: So maybe I let Yoo Hung just touch on how does this 7.5% relate to our 2.6%.
Speaker #3: So I think the main reason for the EV sales decline is like what Jerry mentioned is actually we have actively sort of a re-shuffled the dynamics and some of the EV tenants were actually not in our portfolio anymore.
Speaker #3: So I'm not sure exactly what the number question that you had, but I suppose we can follow up after this.
Speaker #1: Yeah. Go ahead. I'm just asking the 7.5% excluding auto mobile.
Speaker #3: Okay.
Speaker #1: Sales. Why is it 7.5? Because the absolute tenant sales.
Speaker #3: Yeah. Yeah. The absolute tenant sales is higher. And also, I think this quarter we also benefited from the supermarket as well. Yeah.
Speaker #1: Correct. Yeah. So to recap, we have basically refreshed many of our first floor by reducing our EV tenants. So obviously, the EV sales portion would go down.
Speaker #1: Right. So that's it.
Speaker #4: Yeah. Well, yes. I mean, but if you had to convert from, say, an EV tenant to a non-EV tenant, is the expected impact going to be, say, negative reversion?
Speaker #1: So again, it's something that we have disclosed before. Right. And those impact have already been reported in our rental reversions.
Speaker #3: Yeah. I think that effect was a bit more last year. This year, we actually don't have a lot anyway. Yeah.
Speaker #4: Okay.
Speaker #3: But I mean, the replacement of the EV tenants with the other trade categories. Yeah.
Speaker #4: Okay. And I guess if I do the math right, I mean, toys and hobbies, sporting goods and apparel, they are relatively small, but growing fast.
Speaker #4: I think the contribute about, let's say, 200 bips to tenant sales growth, that's where my math suggests. So I'm just curious because 7.5% year-on-year growth in X auto mobile sales is still pretty commendable.
Speaker #4: So excluding even the two categories that are growing fast and F and B, IT and telecoms, seem to be at a lower clip. There appears to be more broader strength across the other categories.
Speaker #4: Am I missing something here?
Speaker #3: If you I mean, if we look at our own close to 20 trade categories, I think we have seen majority seeing higher growth year-on-year.
Speaker #3: So there's only five that's lower. The others are higher. And out of the lower ones, I think like what Jerry has mentioned, the fashion, which is also one of the largest trade categories, is quite flat.
Speaker #3: It's a very marginal lower. So the other trade categories that is negative are fairly small. Perhaps with the exception of leisure and entertainment. So I will agree with you that broad base, our most of the trade categories have shown good growth.
Speaker #4: Okay. Good to know. But maybe just your thoughts on toys and hobbies, I guess the Popmarts, would you say we are still, I don't know, early or midway in terms of the sales trend over there?
Speaker #4: Or are we at a late stage already?
Speaker #3: Again, with the limited samples that we have, this is the healthy growth continues. But then again, it's also very product and the launch-driven. So if there's a very unique rare collaboration or publication of a certain toys, I think then people fall into the shops to queue and buy.
Speaker #3: So it's a bit early to tell. Having said that, I think second quarter versus first quarter, first quarter was doing better. But then again, I think it's also the Chinese New Year and all that.
Speaker #3: So again, a bit too early to tell.
Speaker #1: Yeah. I mean, second quarter generally not only that category, the retail sales have generally moderated. Yeah.
Speaker #4: Okay. And maybe for F and B, I don't know if there's a simple way to split between bubble tea and X bubble tea.
Speaker #1: Bubble tea.
Speaker #3: I guess while we say bubble tea grows well, but it's just an example. I think it's more reflection of the light refreshment type. Right.
Speaker #3: So it includes the coffees. Newer brands of coffees. Teas. And bakeries. So bubble tea is just one small category in the broad category of.
Speaker #1: Yeah. If the question is whether the bubble tea is driving all this growth, it's not. Yeah. It's just.
Speaker #4: Okay. And last question, just to confirm the NAV per unit increase this looks to me probably due to currency effects. Would this be the right intuition?
Speaker #1: It's not only due to currency effects. As we were explaining, a lot of it have to do with the great work from Lincoln's team cutting down this interest cost and finance cost.
Speaker #1: But currency effect helped. I think we reported 1%.
Speaker #3: Increases.
Speaker #1: Increase in revenue during the period. Right. But certainly, the finance savings, as earlier discussion, we also talk about the better and better trends that we are seeing in terms of getting swap the revenue bid.
Speaker #1: Offshore. Right. Has benefit us greatly.
Speaker #4: Okay. Thank you.
Speaker #2: Okay. Thank you, Terrence. We have the next question from Ada. Ada, please go ahead.
Speaker #5: Hey. Hi, Kerry and team. Congrats on a very strong first half and thanks for the presentation. A couple of questions for me. First, to add on to Terrence's question on retail, I noticed that the first quarter reversions actually came in at 2.1%, but that for the first half was negative 2.7%, which seem to indicate a worsening in the second quarter.
Speaker #5: Could you please provide a little bit more color on that?
Speaker #1: Maybe you?
Speaker #3: Yeah. There were some I think cinema renewal that we have yeah. Yeah. We have done. And also I think we have one supermarket replacement.
Speaker #3: So I think that would have affected the second quarter a little bit. Having said that, I think this rent reversion is also depends on the sample that we had in that particular quarter.
Speaker #3: If we say, for example, decided that it helps to replace certain expiring tenants with new concepts that's not necessarily the most rent the highest rent, but benefit the overall position of our mall in the longer term, we'll do that.
Speaker #3: So I wouldn't say that within the first quarter and second quarter, the change of 0. something percent is a big trend to worry about.
Speaker #5: Yeah. I understand. That's very reassuring to hear. Second question is, in a similar vein, how long more will you expect rental reversions to stay negative for the business park portfolio?
Speaker #5: And also wondering if you can share a little bit more color in terms of supply absorption in the sub-market that Singapore Hang Zhou Science and Tech Park is in.
Speaker #3: Okay. On the business park rental reversion, I think this is also a question that we are asking internally and also surveying the market. The supply situation is still the competition is still fierce.
Speaker #3: I would say we are doing everything that we can to bring in the occupancy and therefore the rent is generally market. Right. So if you ask me how long it takes, I think 2026 is expected to be negative.
Speaker #3: 2027, I still think there's some way to go. Hopefully, the supply gap and also the demand can come quicker. That it will be better after 2027.
Speaker #3: That's my broad sense. What's the other question?
Speaker #5: In terms of the supply absorption in the sub-market that Singapore Hang Zhou Science and Tech Park is in.
Speaker #3: Yeah. So Hang Zhou, I think in broadly speaking, I think the whole city still faces quite a lot of supply. I think I've shared last quarter within our sub-zone, within I think the one to two-kilometer radius of us is this area called 大创小镇.
Speaker #3: This is actually a sub-market. This market is relatively fully built. With the exception of only one building that's still under construction, which is the last piece of land within this area.
Speaker #3: So within our part, it's more or less fully built. Then again, I think the absorption takes a bit of time. I think I previously shared that within our park, the older vintage meaning to say the ones that come on market around 2024 or before, it's actually having the occupancy of around 60 to 70 percent.
Speaker #3: Then on the newer last year's vintage, it was close to 50 percent. So there are still pressure on the filling in the vacancies. Yeah.
Speaker #5: Thank you a lot for the color. I think one last question for me is I was just wondering what was driving the increase in other income because there seem to be quite a sharp increase in the first half.
Speaker #5: That was wondering whether it could be due to forfeiture of any tenant deposits.
Speaker #1: Lincoln, yeah.
Speaker #3: So we actually in the PowerPoint slide number eight, we do highlight that we actually have some tenant deposit security deposit that was actually belonging to tenant who has actually left the building.
Speaker #3: Right.
Speaker #1: The prior.
Speaker #3: So under our internal policy, we do review them and then to actually discuss whether there's any chances that the tenant will actually come back and demand the security deposit claim.
Speaker #3: So these are tenants that, let's say, they live in the halfway through the contract and so we do have the right to actually forfeit them.
Speaker #3: But I think out of prudence, we actually keep it for a while and look at what is the tenant's I mean, whether the tenant actually come back to claim.
Speaker #3: So some of these after we have assessed it and then we believe that some of these the security deposit wouldn't be able to challenged.
Speaker #3: So we actually recognize them. Yeah.
Speaker #5: Interestful morning, Dr. Chen. Should we expect the levers to go back to more prior years of levers for the second half, or will there potentially be more security deposits that are recognized in the second half?
Speaker #3: The security deposit is not a lot. I mean, just to clarify, so it's not the main revenue driver.
Speaker #5: Okay. Thanks a lot. I'll jump to the back end of the queue.
Speaker #2: Okay. Thank you, Ada. We have the next question from Geraldine. Geraldine, please go ahead.
Speaker #5: Okay. Morning, Gerry. Lincoln. Maybe a first question on your core DPU. I mean, reversions looks to be declining margin stable and your interest cost savings you are targeting a mid-teens kind of reduction year-on-year.
Speaker #5: So are we confident to say that if we look at just core DPU, this year we are quite well-aligned to actually have a bid against last year's core DPU?
Speaker #3: Core as in core DPU when you define core DPU, you mean without your party. Am I right?
Speaker #5: Yes. And the capital gains.
Speaker #3: okay. Okay.
Speaker #5: Yeah.
Speaker #3: I think we strive to do that. I'm not sure whether the word bid is something that we want to commit to, but I think if you look at the trend, whether it's on the same-store basis for MPI, as well as DPU, we seem to be heading to a position that we'll be not worse off on the clean basis.
Speaker #5: Okay. Okay. Thanks, Geraldine. When it comes to capital gains, how much do you still have left and how will you view additional top-ups end of this year?
Speaker #3: Our past reserve from the investment gain is around 50 million 50 million.
Speaker #5: 60.
Speaker #3: 60 million. Yeah. 60 million. $6. Our policy is we view iew it basically at the end of year for such top-up. That's why in first half, we don't talk about top-up.
Speaker #3: Right. And of course, that's only with good reason. Right. So at this stage, I think I cannot comment on that yet. Last year, obviously, with top-up because we divested your parting and our rationale was this is a transitionary top-up as we find ways to basically replace the income.
Speaker #5: Okay. Okay. This 60 is 6 euro and not 16, right?
Speaker #3: 6 euro. Yes. Yeah. High 50. Yeah.
Speaker #5: High 50. Okay. Okay. Got it. And I think the next question on the second series so if you do do a divestment, how soon can it be and how should we think about it when it comes to structuring?
Speaker #5: Will it be similar to your parting where you're obliged to take on stakes in the second series or it can be a rather clean divestment?
Speaker #3: Well, maybe you all can answer that. I think if I'm not mistaken, the time frame for the second series framework to allow the further injection is six months.
Speaker #3: Yeah. So that's the general I think that that's the policy guidance. On the question on the expected structure, I would say that it's similar.
Speaker #3: That there is certain expectation on the originator or the asset inject from the seller or the originator who actually inject the assets to take a portion in the bill.
Speaker #5: Okay. Okay. Okay. Thank you. Maybe just one last quick question on again on your twice and hobbies. I think for the 3%, right, is that number actually influenced by your new anime street?
Speaker #5: Because it seems that the Pop Mart trend is fading.
Speaker #3: It does help. It does help. But I think okay, give me a moment. It does help, definitely. But even on the just look at the trend that Pop Mart brand, I think it's still doing fairly well.
Speaker #3: And it contributed quite a bit to the more than double I mean, it's in the double digit category.
Speaker #5: Okay. Thank you.
Speaker #2: Thanks, Geraldine. We have the next question from Tabitha. Tabitha, please go ahead.
Speaker #6: Hi. Good morning, Gerry and team. I'm Tabitha from DBS here. So my first question is on your upcoming lease expiries. Any major leases we should be looking out for?
Speaker #3: Expiries? Can you not that I recall, I think we are fairly our bid tenants are the supermarkets and we have just quite recently replaced quite a number of them.
Speaker #3: And this year, there's one that we are replacing and beyond that, I don't recall we have a big expiry that's unusual.
Speaker #6: Okay. And then my next question is on your acquisition opportunities for retail in tier one and tier two cities. Can you share some of your thoughts?
Speaker #6: Maybe some expected timeline and if there are deals in the market now?
Speaker #3: Yeah. We're certainly looking at deals in the market. And we are focusing on retail assets. So that is not a change. Right. Even it's working very hard with the team to scout the market for those opportunities.
Speaker #3: And I can only say that we have seen a few interesting deals we are working on them. We hope that we can get something done by this year.
Speaker #6: Okay. Thank you so much.
Speaker #2: Okay. Thank you, Tabitha. I don't see any other raised hands. If there are no sorry. Okay. Okay. We have a question from Dexter. Dexter, please go ahead.
Speaker #7: Oh, hi. Good morning. Can I ask just one quick question? This is from Bloomberg here. Have you all spoke to any third party investors about divesting assets?
Speaker #7: And if so, is there interest? Yeah. That's it.
Speaker #3: So the question is can you sorry, can you repeat that question? The line isn't.
Speaker #7: Yeah. So basically, have you all spoken to anyone third-party investors? So basically, anyone outside of your CBs or capital ecosystem? About potentially divesting assets.
Speaker #7: And if so, is there how much interest is there?
Speaker #3: I mean, as our usual course of business, there will be people asking about assets. And we will ask about other people's assets all the time.
Speaker #3: So this is very usual.
Speaker #2: Sorry, Dexter.
Speaker #3: Sorry. Your line is. Not very good.
Speaker #2: Sorry, Dexter. You're on mute if you are speaking.
Speaker #7: Oh, no. Yeah. I was asking how much interest there because obviously, the capital market is still quite depressed. So is that what you are seeing as well?
Speaker #3: I don't.
Speaker #2: Capital market is still quite depressed.
Speaker #3: I think the if you're asking about the generally speaking, the transactions on broad markets, I think it remains to be active. We have seen the likes of domestic players actually transacting.
Speaker #3: Yeah. So there are interests. It's a matter of pricing. That's always yeah. It's always in any market. Yeah.
Speaker #7: Okay. Thanks.
Speaker #2: Okay. Thank you, Dexter. We have the next question from Rachel. Rachel, please go ahead.
Speaker #5: Hey. Hi, morning, Gerry and team. Thanks for the presentation. Just a few quick questions from me. Retail reversions do you expect it to neutralize soon since we are seeing a pickup on the retail tenant sales and whatnot?
Speaker #3: I think Yuhong has alluded to and also answered that question. Basically, we have been seeing this sort of. Level of retail reversions even last year and this year.
Speaker #3: Right. Even though you can see occupancy cost is quite stable and sales is good, that really attributed to the fact it's not that the tenants are not doing good sales.
Speaker #3: Right. They are not obviously as positive about the general expansion in their retail stores. Right. And therefore, they feel obviously no particular pressure when you ask them for rental increase to assist to your request.
Speaker #3: That doesn't mean that we don't get positive rental reversions in some of our leases. We do. Right. But as you clearly see, that's outweighted by some of those that we cannot get positive reversions.
Speaker #3: As well as sometimes we as Yuhong alluded, sometimes we make some changes to the more in terms of anchors, in terms of mix that may require some negative reversions.
Speaker #5: Okay. Sorry. I may have missed this, but back to your tenant sales of that 7.5% excluding automobile. Is this going to be one-off as in just for this year 7.5% or moving forward, we can expect this kind of number?
Speaker #5: I'm just trying to yeah.
Speaker #3: I think once we cleared out the automobiles or more clearly to say that we have remixed the automobile sector in our malls, we should get a closer number between with and without the so-called with and without automobile sales.
Speaker #3: Numbers there because automobile sales will become smaller amount. This half year, I think benefited from the supermarket, I think year-on-year as well. But even excluding that, I think we are seeing healthy low single-digit growth.
Speaker #3: So yeah, I think we do hope that this trend continues. So the question of whether the with and without automobiles will that gap become smaller in the statistics, I think it should yeah.
Speaker #5: Okay. Got it. Yeah. Then just one last quick one. I think you said that you are hoping the average cost of that will trend down.
Speaker #5: Right. Is this mainly coming from the conversion of single dollar to renminbi debt? Or is it coming from some of the refinancing to a lower debt rate?
Speaker #3: Sorry, Rachel. The cost of debt.
Speaker #2: I'm joined.
Speaker #3: No.
Speaker #2: Yeah. You joined here late.
Speaker #3: Yeah. So the cost of majority come from a lower cost of borrowing Right. And then, of course, last year, we had some proceeds from Yuhuating that has actually contributed some overall loan requirement loan amount decrease.
Speaker #3: So I would say maybe 60 to 70 percent is actually attributable to our cost reduction and then the other will be actually mainly the average amount of debt that is outstanding.
Speaker #3: And if you're asking about absolute cost of debt percent, which is reported now 3.06, it comes in different forms. Right. Maybe you want to elaborate.
Speaker #3: It's not only because of single stock to.
Speaker #5: Oh, no, no, no. What I mean is forward. I think you're saying that you're alluding to a. To high to percent. Right. Yeah. 2% rate.
Speaker #5: Yeah. Forward. So is that coming from refinancing rate or is it coming from the conversion? Yeah.
Speaker #3: Actually, both. Right. So we actually look at our debt ladder as and when our expensive swap or expensive borrow debt actually due for refinancing and then we were actively discuss and various refinancing options.
Speaker #3: So these are actually will take time. That's why I say it will not be actually happen overnight because we actually do have a debt commitment and also swap commitment.
Speaker #3: So we do need to wait for the refinancing window to open. Right. And then but at this moment, what we can do is there is a market the swap market actually does offer us some opportunity so where possible, we will actually enter into this trade and then try to capture the cost.
Speaker #3: Yeah. Try the cost saving.
Speaker #5: Okay. So it can come from both.
Speaker #3: Yeah. It come from both.
Speaker #5: Okay. Okay. Got it. Thank you.
Speaker #2: Okay. Thank you, Rachel. Noted that we are near the hour. Maybe we have the last question from VJ. VJ, please.
Speaker #6: Hey. Hi. Morning, Gerry and team. Congrats on a decent set of results. Just one question from me in terms of future growth and acquisition potential.
Speaker #6: I mean, if I look at Chinese REITs and Singapore REITs, that is clearly an arbitrage. Chinese REITs are trading at a much lower yield.
Speaker #6: The onshore cost of debt is also lower. So there is every incentive for your sponsor as well as the domestic operators to sell to a Chinese REIT over to you.
Speaker #6: I mean, your cost of capital is not competitive compared to Chinese REITs. In this environment, how do you think you can be competitive in growing your assets in the future?
Speaker #6: Because I see your sponsor, if even they want to divest, they would be better off divesting to a Chinese REIT rather than you. So how can you compete and acquire and grow in the future in this environment?
Speaker #3: Thanks, VJ. I think it's not correct to just characterize that cost of debt is lower onshore. Right. In fact, on onshore market, LPR is about 3%.
Speaker #3: Bank 3.5. Right. Bank loans were depending on credit may end up in the trees. Right. And as you can see, at times, when we find.
Speaker #3: Sure, we can get very. Loans when we swap it back to renminbi and CNH. So that's one point to note. Right. The second thing is in terms of domestic sellers whether they will be selling to a CREIT or the SREITs, that there are of course differences between the two.
Speaker #3: Right. The CREIT, number one, is constrained by a few factors. One, they're gearing has to be lower. Right. I think the gearing limit is about 28.
Speaker #3: Right. We spoke about even though the debting or the transaction timing has become shorter, right, but nevertheless, it doesn't mean everything that gets submitted gets approved.
Speaker #3: There's a long backlog. China being so big. Right. So timing is shortened, but provided to get into the queue. Right. Provided you get in the queue.
Speaker #3: Right. So from perspective of sellers, sometimes they cannot wait. Right. So that's another key point to take note. Third, in terms of the structure of the CREIT, right, they can only buy assets in full.
Speaker #3: Right. Meaning you have to take 100% stick. Right. And then of course, SREIT, we are more flexible. You can see in our own SREITs, we can take 51%, some SREITs have taken significant minority or significant majority as well.
Speaker #3: So a variety of stick and structures can be used in a SREIT transaction. But a CREIT transaction, you can only buy basically the vehicle can only buy 50% of that vehicle.
Speaker #3: Right. And it's also not so useful to just look at the trading yield in a way of the CREIT. Because at the end of the day, valuations still do matter in the CREIT environment.
Speaker #3: The valuations are also scrutinized by the regulators. There's a fixed there's a fixed way that they do look at it. If you look at our Yuhuating Sell, right, when we went out to the market, actually, that's before the IPO premium.
Speaker #3: Right. It was, I think, priced valued at about 6.7, 6.8 percent NPI yield. Right. That's not, I wouldn't say that that's widely off the mark of what we will be willing to sort of trade or buy the asset at based on our ability to gear up and based on the cost of debt that we are looking at today.
Speaker #3: Right. So for those reasons, I don't think it's so clear-cut matter.
Speaker #6: Okay. Thank you. That's all I have.
Speaker #2: Okay. Thank you, VJ. Gerry, would you like to share a few words before we conclude today's session?
Speaker #3: Okay. Thank you everyone for coming through our results presentation. For CLCT, we'll continue to work to make sure that we deliver DPO that is sustainable and that will continue to benefit unit holders through our efforts in growing our retail portfolio.
Speaker #3: Extracting the value from our assets, as well as, very importantly, making use of the overall environment in terms of interest rates to drive down cost.
Speaker #3: And make sure that our DPO continues its recovery path.
Speaker #2: Okay. Thank you, everyone. Please feel free to reach out to me or my team if you have any questions. Have a good day ahead.
