CAQ Leasing Revenue Falls 8% to RMB2.1 Million as Vacancies Persist

Quarterly Performance Overview

CAQ Holdings Limited’s December 2024 quarter results reveal a modest but notable decline in leasing revenue, dropping approximately 8% to RMB2.1 million from RMB2.3 million in the previous quarter. This contraction reflects ongoing challenges in securing tenants across its property portfolio, particularly in the warehouse, factory, and exhibition centre segments.

Vacancy rates remain stubbornly high, with the exhibition centre maintaining a 95% vacancy rate, unchanged from the prior quarter. Warehouses and factories also report elevated vacancies at 37% and 66%, respectively, underscoring the difficulty in attracting new leases amid a cautious market environment.

Impact of Government Policy Uncertainty

The company highlights that the suspension of system integration testing at the exhibition centre is due to pending new government customs requirements. More broadly, potential tenants are reportedly awaiting clarity on the Chinese government’s forthcoming policies related to the establishment of Hainan Island as a free trade port by the end of 2025. This uncertainty is causing delays in finalising tenancy agreements, as businesses seek to understand the implications for their operations before committing.

While the national plan for Hainan’s free trade port status presents a promising long-term opportunity for increased leasing demand, the timing and specifics of policy directives remain unclear. This ambiguity is likely to continue weighing on CAQ’s leasing revenue growth in the near term.

Financial Position and Cash Flow

Financially, CAQ Holdings ended the quarter with cash at bank of just $0.08 million, a significant reduction from the previous quarter’s $0.21 million. Operating cash flow was slightly negative, reflecting ongoing costs and limited revenue inflows. Importantly, the company reported no payments to directors or their associates during the quarter, indicating a conservative approach to cash management.

CAQ’s financing facilities remain intact, with a secured loan facility of approximately AUD 2.9 million drawn in full, backed by commercial and administrative buildings. However, with no unused financing facilities available, the company’s liquidity position will require close monitoring as it navigates the uncertain leasing environment.

Looking Ahead

CAQ Holdings is actively negotiating new tenant contracts across its vacant properties, but the pace of leasing activity is expected to hinge heavily on the timing and content of government policy announcements. The company’s ability to convert negotiations into signed leases will be critical to reversing the recent revenue decline and improving occupancy rates.

Investors should watch for updates on Hainan’s free trade port policies and any operational progress at the exhibition centre, as these factors will likely shape CAQ’s performance trajectory in 2025.