• CLCT reported a 4.9% y/y decline in NPI to RMB631m; DPU (-19% y/y, flat q/q) of 3.01 scts was in line with our estimates
• Retail segment continues to hold the fort with high c.98% occupancy with slight positive reversions; Weakness flows down to logistics segment which saw deep negative reversions at -27% for 1H24 lease renewals
• Divestments of non-core retail assets continue to be on the radar to alleviate balance sheet pressures 
• We currently have a BUY with TP of S$0.95. 

1H24 Results. CLCT reported a 4.9% y/y decrease in 1H24 NPI to RMB631m, on lower contributions from its logistics and business park portfolio, offset by strong retail performance. DPU for 1H24 of 3.01 scts was flat on a h/h basis and a 19% y/y decline, and came in line with our full year estimates of 6.0 scts. The retail segment remains the most resilient with flat contributions y/y albeit the divestment of Shuangjing mall and termination of Qibao mall lease. On a same-store-basis, retail segment NPI growth would have been 6.1% y/y, supported by recent AEI completions and with underlying tenant sales remaining healthy and registering a 6.6% y/y improvement. Reversions were positive at 1.2% for leases signed in the period, with high occupancy rate maintained at 97.8%. Within the new economy segment, business park occupancy improved marginally to 90.5% (+0.3ppt q/q), with reversions slightly negative at -3.7% for this half and tilted towards stronger than average negative reversions within Hangzhou business parks. Logistics segment delivered a mixed set of results. Leases signed in this period were steeply negative at -27%, as per guidance from previous quarters, with logistics portfolio occupancy at 70.4% post tenant vacation at Shanghai Fengxian asset from business closure. Apart from CLCT’s Shanghai logistics asset, logistics occupancy for the other three assets would have ended at c.90% for the quarter. CLCT's cost of debt remained stable at 3.49%, with a healthy interest coverage ratio of 3.2 times. Gearing remained stable at 40.8%, with 76% of CLCT's total debt on fixed interest rates. RMB-denominated loan facilities made up c.27% of CLCT’s total debt book this period, with plans to further expand this to 30% by the end of the year.

Our thoughts. Datapoints within the new economy segment continue to remain weak as per guidance, feeling the wrath of both a general decline in overall submarket rents for logistics assets in China, alongside supply overhang for selected China cities like Hang Zhou. We have priced in buffers within our CLCT’s estimates, with full year DPU of 6.0 scts. Within the new economy segment, we watch for two things (i) upcoming business park lease renewals, which makes up c.26% of GRI income for remaining FY24F leases, (ii) tenant prospecting at Fengxian logistics asset which management has guided to see at least 3-6 months of vacancy. Our views on retails remain the same where reversionary rents will likely remain stable and within the low single digit positive range from AEI completions and inbuild lease escalation. Divestments continue to be on the radar and primarily targeted at non-core retail assets for now, including Aidemengdun Mall and Xinnan Mall. While management is open to explore divestments within the new economy segment, rent volatility, alongside a low overlap of bid ask spread has made for a difficult investment market at the current point in time.