China’s premium mall operator doubling its footprint
We have been shareholders of China Resources Land (CR Land) in our Greater China portfolios for many years. We believe CR Land is a high quality, dominant business that should benefit from China’s structural tends such as improving demographics, rising incomes and urbanisation.
China Resources Land (CR Land) is 61% owned by China Resources Holdings (CR Group). CR Land is a state-owned enterprise, but as one of the oldest 'red-chips', it has a long history of operating commercially and to high standards. CR Land is also the tenth-largest developer in China.
At the end of 2018, CR Land had 51 malls in operation, with a total floor area of 92 million square feet. They have another 52 malls under development, with total space projected to double. Contrary to the experience of the West and despite high e-commerce penetration in China, the business has continued to see strong double-digit same-store-sales growth.
Although over the short term, the pandemic has clearly affected discretionary spending in China, we expect the recurrent income to grow in the next four years when the other malls in the pipeline are fully developed.
Mature malls generate healthy growth and decent returns
Rental income could double when malls in pipeline developed
Source: Company data, FSSA Investment Managers. as at 31 December 2020.
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