CapitaLand China Trust - Revenue remains resilient, led by retail assets

Stocks

By Gerald Wong, CFA • 07 Aug 2026

Global Wealth Technology Pte. Ltd. is regulated by the Monetary Authority of Singapore (MAS) as a licensed Financial Adviser.

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CapitaLand China Trust reported 1HFY26 DPU grew 2.9% year-on-year to 2.45 Singapore cents, on a same-store basis excluding CapitaMall Yuhuating. With trailing twelve months DPU of 4.78 cents, this translates to a distribution yield of 7.1%.

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CapitaLand China Trust - Revenue remains resilient, led by retail assets

1HFY26 distribution per unit grew 2.9% year-on-year to 2.45 Singapore cents, on a same-store basis excluding CapitaMall Yuhuating.

Distributable income declined 0.6% year-on-year in 1H26 to S$43.165 million.

With 2H FY25 DPU of 2.33 cents, the trailing twelve months DPU of 4.78 cents translates to a distribution yield of 7.1% based on the closing price on 5 August 2026 at S$0.67 per unit.

Management is confident of at least maintaining a stable core DPU, underpinned by improving same-store NPI and DPU trends.

Remaining capital gains reserves from divestment stand at approximately S$50 to S$60 million. The policy is to review potential top-ups at year-end only.

Revenue remains resilient, led by recovery in retail segment

Revenue declined 5.2% year-on-year, largely due to divestment of CapitaMall Yuhuating. Gross revenue fell to RMB 822.6 million in 1H26, from RMB 867.6 million in 1H25. Excluding Yuhuating's contribution in 1H25, same-store revenue declined by a slim 0.2% year-on-year, demonstrating the underlying resilience of the retained portfolio.

Net property income (NPI) was down 3.3% year-on-year. NPI declined to RMB 561.0 million in 1H26, from RMB 580.3 million in 1H25. Encouragingly, on a same-store basis excluding Yuhuating, NPI grew 1.3% year-on-year, driven by a 3.5% year-on-year in cost reduction and lower interest expense.

With active cost discipline, same-store operating costs were reduced by 3.5% year-on-year. A broader push on capital management — including repricing China mortgage loans and shifting borrowings from SGD to RMB — cut interest costs by about 16%, or S$5 million.

By segment, NPI margins were fairly consistent at 67% for retail, low-70s% for business parks, and around 60% for logistics.

Retail portfolio is still the core earnings driver

Retail portfolio is the largest contributor to CapitaLand China Trust’s Net property income (NPI). In 1H 2026, the retail assets account for 70.7% of the NPI.

The retail portfolio delivered an encouraging operational performance in 1H FY26, with shopper traffic up 3.2% year-on-year and tenant sales up 2.6% year-on-year. These are ahead of full-year 2025 levels.

The introduction of three new supermarkets contributed Rmb 153 million in 1H FY26. Tenant sales and drove material traffic growth at CapitaMall Xuefu (+11.0% year-on-year), CapitaMall Xizhimen (+6.4% year-on-year) and CapitaMall Wangjing (+4.7% year-on-year).

Key trade sectors showing sales improvements include Toys & Hobbies and Sporting Goods & Apparel.

The Toys & Hobbies reported a 42.6% year-on-year increase in sales, supported by strong double-digit growth from Pop Mart and Miniso.

The anime street concept also contributed, with management noting Pop Mart's performance remains product- and launch-driven, making it too early to assess sustainability of the trend.

Occupancy cost remains steady at 17.5% in 1H FY26 from 27.5% in 2022, reflecting a material improvement in tenant health and affordability. Lower occupancy costs support lease renewal and tenant retention, reducing the risk of vacancies.

CapitaLand China Trust continues to strategically remix its tenant base towards higher-traffic categories. Food & Beverage, already the dominant category at 39.2% of retail gross rental income (GRI), is being further enhanced with trending dining brands.

However, headline retail rental reversion declined 2.7% in 1H FY26, compared with +2.1% in 1Q FY26. The decline in 1H FY26 was due to a cinema renewal and a supermarket replacement in 2Q FY26, not a broad deterioration.

Besides the tenant mix, CLCT is also working on the next acquisition to fill the gap left by Yuhuating. Management said to focus on property with yield around 7%. An acquisition is expected to close by end 2026.

Business park - stable occupancy but weak rental reversion

Business park’s occupancy was 85.1% as at 30 June 2026, down from 86.0% as at 31 March 2026.

More importantly, CapitaLand China Trust's assets are outperforming their respective submarket occupancy rates. Ascendas Xinsu Portfolio achieved 95.4% occupancy against the Suzhou submarket rate of 73.1%. The combined AIT and AIH occupancy of 83.0% compares favourably to the Xi'an submarket rate. SHSTP Phase I and II outperformed Hangzhou submarket occupancy as well.

The rental reversion was -12.0% in 1H FY26, reflecting the challenging leasing environment with the Hangzhou Science and Tech Park.

Management secured approximately 102,000 sqm of renewals and new leases in 1H FY26, representing about 14.3% of total Business Park net leasable area.

Business park rental reversions are expected to remain negative through 2026 and into 2027, with management's broad expectation of improvement only after 2027 given persistent supply pressure.

The Hangzhou Science and Tech Park submarket is effectively fully built within a one-to-two kilometer radius except for one building still under construction.

Within the Hangzhou Science and Tech Park, older-vintage buildings (on market around 2024 or earlier) have occupancies of 60 to 70%, while the newest vintage from 2025 is near 50%, reflecting continued absorption pressure.

Logistics parks reported an upside surprise in rental reversion

Logistics parks posted strong operational performance.

Occupancy has stabilised at close to full, at 99.0% as at 30 June 2026, unchanged from the preceding quarter and up from 98.1% at end-2025. Three of four parks (Shanghai Fengxian, Kunshan Bacheng and Wuhan Yangluo) maintained 100% occupancy throughout.

Rental reversions have narrowed sharply to -1.2% in 1H26, from around -20% in 2025. Management described this as the bottom for logistics rents.

The standout highlight is the dramatic improvement in rental reversion. Following proactive leasing of 17,400 sqm of executed space, logistics park rental reversion improved from -24.5% in FY2025 to -1.4% in 1Q FY26. This strongly suggests the logistics rental market is bottoming, with Chengdu Shuangliu Logistics Park occupancy also recovering from 82.9% in March 2025 to 96.2% as at March 2026.

While logistics parks contribute only 3.3% of portfolio gross rental income (GRI), the improvement in this segment removes a meaningful headwind to distribution growth going forward.

Portfolio metrics have room for improvement

Weighted average lease expiry (WALE) remains stable at 2.4 years as at 30 June 2026, from 2.5 years as at 31 March 2026.

CLCT is actively managing the lease. Overall occupancy levels remain stable, with retail portfolio holding up at 97.3%.

Business parks saw occupancy dip to 85.1%, reflecting continued leasing softness in office and business park space. Management expects this segment to remain competitive. Logistics parks continued to deliver very high occupancy at 99.0%, supported by strong demand from distribution and e-commerce tenants.

CapitaLand China Trust will continue to look for acquisition opportunities in the retail segment, at around 7% yield. An acquisition of retail asset is expected to close by end 2026.

Healthy balance sheet

The debt maturity profile looks well laddered. Only 6.7% of total debt falls due in 2026, rising gradually to a peak in 2029 at 27.1% before tapering off again.

This gives management time to refinance opportunistically or adjust the currency of funding. The mix of SGD and RMB borrowings across bank loans and bonds also spreads funding sources, while keeping currency exposure aligned with the underlying China-focused assets.

Proportion of RMB-denominated debt increased significantly to 73% as at 30 June 2026, from 60% as at 31 December 2025. CLCT targets to maintain the range at 70% to 80%.

CapitaLand China Trust's financial position remains healthy, with aggregate leverage at 40.4% as at 30 June 2026 — improved from 41.4% as at 31 March 2026. The lower aggregate leverage ratio was driven by RMB appreciation and cross-border cash management efforts.

The Trust has S$1,736.8 million in total debt with a weighted average term to maturity of 3.0 years.

The most significant positive development in capital management is the continued reduction in cost of debt. Average cost of debt fell to 3.06% in 1H26 from 3.10% in 1Q26 and 3.42% in 2Q25 — a 36 basis point decline year-on-year.

This was achieved by growing the proportion of lower-cost RMB-denominated debt to 73% of total debt.

The swap market currently offers a saving of 30 to 40 basis points on a five-year SGD-to-RMB conversion (e.g., a 2.8% SGD issuance translates to approximately 2.4% in renminbi terms).

A RMB 600 million FTZ bond (current coupon 3.8%) is due for refinancing in October 2026. Management is evaluating options and is confident it can be refinanced at well below 3%.

Management expressed a target cost of debt at high 2% range in the near future, with savings expected from both the ongoing SGD-to-RMB conversion and refinancing of higher-cost legacy debt as windows become available.

Interest coverage ratio (ICR) remains unchanged at 2.9x as at end-2Q FY26 (end-1Q FY26 : 2.9x).

Maintain BUY and target price of S$0.88

Currently, CapitaLand China Trust is trading at S$0.67, offering FY26E distribution yield of 7.1%.

In terms of P/B ratio, CapitaLand China Trust is trading at a discount to its book value, at P/B 0.76x. This is broadly in-line with peers - Lendlease Global Commercial REIT is trading at 0.7x and Mapletree Pan Asia Commercial Trust is trading at P/B 0.76x.

We maintain our BUY rating with a target price at S$0.88.

The macroeconomic environment in China is on track with the government’s target. China's GDP grew 4.7% year-on-year in 1H FY26, within the government’s 2026 growth target of 4.5% – 5.0%. Manufacturing grew 5.5% year-on-year in 1H26, while the services sector expanded 5.2% year-on-year. The positive momentum provides a supportive backdrop for leasing in retail and business park portfolios.

CapitaLand China Trust on Beansprout’s REIT Income Pot framework

We apply Beansprout's REIT screening framework - DPU growth, gearing, and yield versus risk-free alternatives - to assess whether CapitaLand China Trust (“CLCT”) is suitable for an income-focused portfolio.

Check	CapitaLand China Trust
DPU growth – able to generate stable earnings	✅ Pass — 1HFY26 DPU 2.45 cents, +2.9% year-on-year, on a same-store basis
Aggregate leverage < 45%	✅ Pass — 40.4% as of 30 June 2026
Dividend yield > 5%	✅ Pass — 1H FY2026 trailing twelve months DPU of 4.78 cents, translating to a distribution yield of 7.1% (5 Aug closing price S$0.67)
Overall	3/3 checks
Source : Beansprout

Check #1: DPU growth grew steadily

1H FY2026 DPU of 2.45 cents was 2.9% higher year-on-year, with gross revenue -0.2% and NPI +1.3%, on a same-store basis.

Check #2: Gearing ratio at an acceptable level

Aggregate leverage stood at 40.4% as at 30 June 2026, down from 41.4% as at 31 March 2026 and well within Beansprout's preferred gearing threshold.

Interest coverage ratio of 2.9x and a well-balanced debt profile further support balance sheet resilience. CLCT has S$516 million of undrawn revolving facilities.

Check #3: Distribution yield remains attractive

Trailing-twelve-month DPU of 4.78 cents (1H FY26’s 2.45 cents plus 2H FY25’s 2.33 cents), against the 5 August 2026 closing price of S$0.67, implies a distribution yield of 7.1%.

Currently, Singapore Savings Bond is offering about 2.1% and 6-month T-bill is offering around 1.6%.

CLCT is trading at a spread of 5.0% to 5.5% over risk-free rates. This is above Beansprout's preferred minimum spread of about 3 percentage points, compensating investors for CLCT’s RMB exposure and modest outlook of the business park assets.

What do we watch out for?

CLCT passes the checks for the Income Pot framework. Investors should monitor the asset acquisition, the backfilling the business park assets and rental reversion trends.

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