1st Key Metric: Funds from Operations Per Share (FFOPS)
To assess Reits/Trusts, a very important metric to use is Funds from Operations(FFO) as it measures the profitability of the reit/stock after taking into account of depreciation and gains from disposal of assets. Funds from operations is a much more reliable metric to assess how well the trust/reit is doing.
The formula : Net income - Interest income + Interest expense + Depreciation- Gains on asset sales + Losses on asset sales = Funds from operations
For CapitaLand Mall Trust, FFOPS:
1Q2015: 0.0297
1Q2016: 0.0317
There is an improvement of about 6%
2nd Key Metric: NAV Per Share
The NAV of a company is its Assets minus liabilities, divided by the outstanding number of shares, we get the NAV per share. It is the 'book value' of a stock. If the market price of the stocks is below the NAV, it may mean a good opportunity to buy the stock.
Current NAV (1Q2016): $1.88
Current Stock price: $2.17
Premium: 15%
Earnings implication- Saved by Bedok Mall
1. The revenue of Bedok Mall- $14.6m attributed mainly to the increase in revenue. This means that if CMT did not acquire Bedok Mall, its revenue would have been $152.7, a decrease as compared to 1Q2015 which inherently means the other malls are not faring as well. The improvement of IMM by $1.3m can barely save all the other malls.
This is why for a reit to grow, it is important to acquire new assets and improve on the existing ones.
2. Other assets- Jcube, Sembawang Shopping Centre, Clarke Quay, The Atrium @ Orchard are performing worse.
Looking at this chart, retention rate for:
Clarke Quay: 66.7%
The Atrium: 44.4%
Other assets (Jcube and Sembawang shopping centre): 71.4%
Not a very good sign..
This also means that Heartland malls are doing much better, which Frasers Centrepoint Trust is very strong at.
Overall- Will not buy now.
Better than expected performance results, DPU also increased. But the current price of $2.17 sets a premium of 15% to its NAV value.
Not a good bargain.
I am also cautious of how the other malls are doing in future especially Clarke Quay, Jcube, Orchard.
Bedok mall cannot save the day, all the time.
