In an update on Apr 14, JP Morgan reduced its end-2026 target price of 78 cents for CapitaLand China Trust to an end-June 2027 target price of 66 cents while retaining a neutral rating.
As JP Morgan sees it, CLCT is navigating a landscape in China where its retail portfolio has stabilised compared to structural headwinds in its business park portfolio and challenges in its logistics portfolio. Its FY2025 data show that retail continues to recover, with tenant sales for FY2025 up 2.1% y-o-y; but 4Q2025 tenant sales rose by 9.4% y-o-y. Meanwhile occupancy cost declined to 17.5% in FY2025 from 23.7% in FY2021, and 18.4% in FY2024. Occupancy cost is the ratio of total expenses ie occupancy costs divided by gross sales.
Business park occupancies rose q-o-q but declined y-o-y in 4Q2025. The occupancy of the four logistics assets improved q-o-q and y-o-y in 4Q2025 but rental reversions were a negative 24.5%.
As of March 2026, the People’s Bank of China (PBoC) has maintained the 1-year and 5-year Loan Prime Rates (LPR) at record lows of 3.0% and 3.5% respectively for ten consecutive months. “While near-term funding cost relief is expected from the shift toward RMB-denominated debt, asset recycling and portfolio rejuvenation remain contingent on divestment execution,” the JP Morgan report says.
In JP Morgan’s view, retail stabilisation is underway with positive contributions from AEI completions at Xizhimen, Rock Square, Wangjing and Xuefu.
“While CLCT’s own properties are outperforming, the weaker leasing environment suggests that negative rental reversionary pressures are unlikely to abate in the near term,” JP Morgan says.
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According to the report dated April 13, asset rejuvenation is likely to depend on divestments as there is limited headroom because of the aggregate leverage at 40.7% as at end-Dec. “We believe CLCT may explore opportunities for follow-on divestments to CapitaLand Commercial C-REIT (CLCR) or other C-REITs, especially given the shorter six-month timeframe between divestments, down from 12 months previously, and a more accommodative environment for commercial property C-REIT listings,” JP Morgan says.
Based on the tepid outlook, JP Morgan has lowered its target price to 66 cents because of lower distributions per unit (DPU) due 7.to the divestment of Yuhuating to CLCR.
Separately, Goldman Sachs has initiated coverage on UI Boustead Industrial REIT with a 12-month target of 91 cents but with a neutral rating “as we see near-term inorganic growth limited by a relatively higher cost of capital and limited debt headroom of roughly $70 million”.
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Goldman Sachs is forecasting a three-year DPU Cagr of 3.2% for UI Boustead Industrial REIT, which is above its S-REIT coverage average, “driven by an occupancy uplift to 96.3% by FY2029, positive rent reversions, and 2-3% rental escalations across its long 5.8-year WALE portfolio”.
Despite a sponsor pipeline of US$5.9 billion, the REIT’s almost 6% weighted average cost of capital or WACC would cause any acquisition in Japan to be dilutive, Goldman Sachs suggests, hence relying on organic growth to fulfil the DPU projections for FY2027.
Goldman Sachs was one of the underwriters and bookrunners for UI Boustead REIT’s IPO, which was priced at 88 cents per unit.
