SINGAPORE (Oct 24): OCBC Investment Research is keeping its “hold” call on CapitaLand Retail China Trust (CRCT) with a slightly higher fair value estimate of $1.61 from $1.59 previously.

“We continue to be positive on CRCT’s long-term prospects, though current unit prices could be more compelling,” says OCBC lead analyst Deborah Ong in a Tuesday report.

This comes after CRCT on Monday posted 3Q ended September results that OCBC says were “within expectations”.

The manager of CRCT declared distribution per unit (DPU) of 2.37 cents for 3Q17, just 0.4% higher than DPU of 2.36 cents a year ago.

See: CapitaLand Retail China Trust posts 0.4% rise in 3Q DPU of 2.37 cents

According to Ong, this makes up 22.0% of OCBC’s initial full-year forecast, which includes an assumed capital distribution top-up from CRCT for the CapitaMall Anzhen divestment.

“We previously assumed that there will be a top-up from the Anzhen divestment proceeds for any lost income due to the disposal in FY17 and FY18, but have now adjusted our DPU forecasts to assume no top-up to be conservative,” says Ong. “Without the assumption of this top-up, the 3Q17 DPU of 2.37 cents would have made 22.8% of our full-year forecast.”

More clarity on any potential capital distribution is expected to come in next quarter, she adds.

Meanwhile, Ong notes that “CRCT recorded a resilient portfolio occupancy of 95.6%, clocking a healthy rental reversion of 7.5% in 3Q17.”

She sees the potential for CapitaMall Wangjing to be a catalyst for CRCT, on the back of strong leasing demand.

“Going forward, we expect greater contributions from CapitaMall Wangjing from 2Q18 onwards as the proportion of non-anchor NLA (net lettable area) increases from 50% to 60%,” she says.

As at 11.43am, units in CRCT are trading half a cent lower at $1.68, implying an estimated price-to-earnings ratio of 19.8 times and DPU yield of 6.1% for FY17.