• 3Q24 gross revenue of RMB452.8m (-5.2% y/y) and NPI of RMB298.9m (-5.4% y/y) due to lower occupancy and rents from new economy segment
• Retail continues to be the redeeming star with c.3% y/y growth in segment NPI, uplifted by AEIs; Business Park segment saw a 3.2ppt decline in occupancy q/q from anchor tenant exit at AIT while logistics segment saw a 2.8ppt uplift in occupancy rates
• Issued CNH400m onshore bond at 2.9% coupon rate in Oct-24 to buffer interest cost going into FY25
• Maintain BUY with TP of SGD0.95 on attractive valuations; Share price could have already priced in worst case DPU floor at 5.5 cts (vs our estimates of 6.0 Scts), implying a current yield of 7.3%

3Q24 Operational Update – trailing behind expectations. CLCT reported 3Q24 gross revenue of RMB452.8m (-5.2% y/y) and NPI of RMB298.9m (-5.4% y/y). The top line revenue decline was attributed to lower occupancy and rents from the new economy segments, and absence of contribution from divested malls Shuangjing Mall and Qibao.  Portfolio occupancy ended the quarter at 91.4%. Retail occupancy saw a marginal 10 bps improvement q/q to 97.9%. CLCT’s retail segment saw a 2.9% y/y (9M24) increase in  operating net property income on a same-store basis, uplifted by stronger shopper traffic (9M24: +10.1% y/y) and tenant sales (9M24: +2.4% y/y) post AEI completions. Retail reversions were marginally negative <-1% on a YTD basis. Business park segment saw a 3.2ppt decline in occupancy on a q/q basis to 87.3%. AIT saw the impact of a major tenant relocation, giving up c.20% of NLA space at the asset. At the same time, CLCT is in advanced negotiation with a new tenant to partially backfill this space (13% of AIT’s NLA) and to see potential commitment towards year-end. Post commitment, AIT’s occupancy is expected to stabilise at 85% with Business Park Portfolio occupancy lifted to 89%. BP leases recorded a -2.5% reversions on a YTD basis. Logistics segment saw an increase in occupancy for the quarter, rising 2.8ppt to 93.1% (excluding SH Fengxian Logs). New leases were signed with tenants within the smart appliances and food sectors at Kunshan Bacheng logs park to drive a c.15ppt increase in occupancy to full capacity at the asset. Business park reversions – Hangzhou should move to 80-85%. Suzhou reversions positive, xian and Hangzhou negative. Reversions low single digit range negative going into 2025. 

Our thoughts. CLCT announced good progress on the capital management front this quarter. CLCT issued a CNH400m 3-year bond at 2.9% coupon in Oct-24 to replace some of the SGD-denominated expiries in the period. Cost of debt ended the quarter at 3.55% as at quarter end has yet to reflect the effect of this new bond issuance, but is expected to help maintain interest cost stable at current levels. Total RMB-denominated loan exposure will increase from 27% (Jun-24) to 35% of total loan book, with 76% of interest rate fixed. Other capital management metrics remains healthy with ICR flat q/q at 3.2x and gearing up 80 bps q/q to 41.6%. CLCT started early refinancing negotiations for debt coming due in FY25 and secured forward 12 months lease renewals. Portfolio weakness within the new economy segment continues to be a known risk, with negative reversions in the tune of low single digit for business park and stronger negative reversions in the logistics segment to be the base case towards year end and going into FY25. 1H24 reported DPU at 3.01 scts makes up c.50% of our full year and we foresee downward pressure on 2H24 DPU primarily from new economy lease renewals that are locked in at progressively lower rates through the year and occupancy pressures within the new economy segment, including Feng Xian logistics park which is sitting vacant post master lease tenant exit in 1Q24 (which we have priced into our estimates). Accumulated weakness since 1H24 should see a floor DPU of 5.5 scts (vs our current FY24F estimates of 6.0 scts) or a peak -18% y/y decline in DPUs in the bear case scenario. 

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