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Top Stock Highlights of the Week: CapitaLand Investment Limited, CapitaLand China Trust and Micro-Mechanics

Royston Yang
·4-min read

Welcome once again to our top stock highlights where we feature interesting snippets or corporate earnings from a variety of businesses.

CapitaLand Investment Limited (SGX: 9CI)

CapitaLand Investment Limited, or CLI, announced that its wholly-owned lodging business unit, The Ascott Limited, has established a development venture with Riyad Capital to develop student accommodation assets in the US.

This initiative will be called Student Accommodation Development Venture (SAVE) and will have US$150 million in committed capital, with Ascott holding a 20% stake in the venture.

Riyad Capital is one of the largest institutional investors in the Middle East.

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Once fully deployed, Ascott’s funds under management (FUM) will increase by US$375 million.

SAVE’s first investment is in a Class-A, 779-bed student accommodation asset in Nebraska, USA. The property is under construction and is slated to complete by August 2023.

With the new acquisition, Ascott would have invested a total of US$648.9 million to build and own a portfolio of nine student accommodation assets via its various funds and through its trust, Ascott Residence Trust (SGX: HMN), or ART.

CLI’s CEO of Lodging, Mr Kevin Goh, commented that the SAVE initiative, together with Ascott’s private fund and ART, will enable the group to grow its lodging FUM even further.

As a result, fee-related earnings will be boosted and contribute to CLI’s capital-efficient business model.

He added that student accommodation assets are known for their counter-cyclical qualities that provide income resilience for investors.

CapitaLand China Trust (SGX: AU8U)

CapitaLand China Trust, or CLCT, reported a healthy set of earnings for its fiscal 2021 (FY2021).

Gross revenue surged by 79.5% year on year to S$378 million while net property income (NPI) soared by 85.2% year on year to S$250.4 million.

The better performance was due to contributions from the REIT’s newly-acquired logistics and business parks portfolios as well as a full-year contribution from CapitaMall Nuohemule, which opened with 100% occupancy in December 2020.

Distribution per unit (DPU) jumped by 37.5% year on year to S$0.0873, giving CLCT’s units a trailing distribution yield of around 7.4%.

Listed back in 2006 with just seven retail malls and assets under management of S$800 million, CLCT has since grown significantly.

The China-based REIT now has 11 retail properties, five business parks and four logistics parks with an AUM of S$4.9 billion as of 31 December 2021.

The REIT’s gearing stands at 37.7% as of end-2021 with a low cost of debt of 2.62% and healthy interest coverage of 4.9 times.

CLCT’s malls are seeing a healthy uptick in both shopper traffic and tenant sales, with FY2021 logging a 9.3% and 16.1% year on year growth, respectively.

Its malls also retained high occupancy of 96.3%, although negative rental reversion of 3.4% was recorded.

The REIT’s new economy assets are also displaying healthy metrics.

Business park occupancy stood at 96.2% with a 7% positive rental reversion while logistics parks enjoyed a 97.4% occupancy and achieved a positive rent reversion of 2.7%.

Micro-Mechanics (Holdings) Ltd (SGX: 5DD)

Micro-Mechanics (Holdings) Ltd, or MMH, recently released its fiscal 2022 first half (1H2022) earnings for the period ended 31 December 2021.

Revenue rose by 10.7% year on year to S$40.8 million while operating profit increased by 9.7% year on year to S$12.8 million.

Net profit inched up by 4.6% year on year to S$9.5 million due to a 27.7% year on year jump in tax expenses.

Higher sales were registered in both the China and US markets, and capacity utilisation for the second quarter increased to 62% from 57% a year ago.

The group ended the calendar year with S$18.3 million in cash with no debt.

For 1H2022, MMH generated S$9.4 million of free cash flow, slightly lower than the S$10.5 million a year ago.

The manufacturer of high precision tools and parts declared an interim dividend of S$0.06, unchanged from last year.

The World Semiconductor Trade Statistics (WSTS) has forecast the semiconductor market to grow at 25.6% in 2021 to reach a market size of US$553 billion.

This would be the highest rate of growth for the industry since 2010.

By 2022, WSTS is projecting that the global semiconductor market will grow by 8.8% to US$601 billion.

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Disclaimer: Royston Yang owns shares of Micro-Mechanics (Holdings) Ltd.

The post Top Stock Highlights of the Week: CapitaLand Investment Limited, CapitaLand China Trust and Micro-Mechanics appeared first on The Smart Investor.