Capitaland Mall Trust - UOB Kay Hian 2017-01-23: 4Q16 Results Of CMT In Line With Expectations

Capitaland Mall Trust - UOB Kay Hian 2017-01-23: 4Q16 Results Of CMT In Line With Expectations CAPITALAND MALL TRUST C38U.SI

REITs − Singapore - 4Q16 Results Of CMT And FCT In Line With Expectations

  • The results of CapitaLand Mall Trust (CMT) and FCT both came in in line with expectations. Both retail REIT managers have re-iterated a subdued outlook on the domestic retail sector.
  • Maintain HOLD on CMT with an unchanged target price of S$1.95. 



WHAT’S NEW

  • CapitaLand Mall Trust (CMT) and Frasers Centrepoint Trust (FCT) have reported their quarterly results.


ACTION 


CapitaLand Mall Trust (CT SP/HOLD/S$1.985/Target:S$1.95) 


Results in line with expectations; maintain HOLD with a target price of S$1.95.

  • Entry price: S$1.70. 
  • Our valuation is based on DDM (required return: 6.3% and terminal growth of 1.2%). 
  • CMT’s 4Q16 DPU was flat at 2.88 S cents, due to the distribution of S$12m in retained income (from 1Q16) in the quarter. Excluding this, 4Q16 DPU would have declined 11.8% yoy. 
  • FY16 DPU of 11.13 S cents (-1.1% yoy) came in within our expectations, representing 100.6% of full-year forecast. 
  • 4Q16 gross revenue and net property income saw respective declines of 6.1% yoy and 7.6% yoy, on the back of Funan's closure last July, as well as Rivervale Mall which was divested in Dec 15.

Rental reversions stood at 1.0% for FY16 (9M16: 1.3%). 

  • 4Q16 reversions were positive, although management refrained from disclosing further details. 
  • Negative reversions were recorded at Bugis+ (-8.0%), Westgate (-7.2%), The Atrium @Orchard (- 2.5%), and Bedok Mall (-1.3%) for FY16. Tenant sales were up 2.3% yoy while shopper traffic grew 0.9% yoy.


STOCK IMPACT


Challenging retail environment. 

  • Management has re-iterated its cautious outlook on the sector, noting that the retail sales index (excluding motor vehicle sales) declined 0.6% and 2.1% on a yoy basis in October and November 2016 respectively. 
  • It also previously highlighted high labour costs, the ubiquity of online retail platforms and lower tourist expenditure to be contributing factors. 
  • Management will continue to place emphasis on maintaining DPU distributions.

Funan update. 

  • 4Q16 saw demolition works completed for the S$560m project (611,000 sf by NLA), with the site handed over to the main contractor this month. A showsuite will be opening come 2Q17. 
  • Management re-iterated that the AEI remains on the track and that a cinema operator has just signed on, taking leasing pre-commitment to 15%. 
  • We would not rule out the likelihood of CMT leveraging on the expertise of sister REITs CCT, ART and sponsor CapitaLand in potential tie-ups.







Vikrant Pandey UOB Kay Hian | Derek Chang UOB Kay Hian | http://research.uobkayhian.com/ 2017-01-23
UOB Kay Hian SGX Stock Analyst Report HOLD Maintain HOLD 1.950 Same 1.950



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