CapitaLand Mall Trust - OCBC Investment 2018-01-25: Potentially Earlier Boost From Funan

CAPITALAND MALL TRUST C38U.SI

CapitaLand Mall Trust - Potentially Earlier Boost From Funan

CapitaLand Mall Trust (CMT) reported its 4Q17 results which met our expectations.
Gross revenue and NPI grew 1.8% and 2.6% y-o-y to S$172.4m and S$119.3m, respectively. This was largely driven by higher occupancy at Bugis Junction and The Atrium@Orchard, coupled with higher carpark income, but partially offset by lower rentals at Bedok Mall. DPU for the quarter inched up 0.7% y-o-y to 2.90 S cents, as management released S$7.6m of its taxable income available for distribution retained in 1H17 to unitholders.
For FY17, CMT’s gross revenue was down 1.1% to S$682.4m due largely to the absence of income from Funan, and this formed 99.8% of our forecast. DPU of 11.16 S cents represented a mild growth of 0.3% and met 100.4% of our full-year projection.

Operationally, CapitaLand Mall Trust’s shopper traffic slipped marginally by 0.3% in FY17, while tenants’ sales psf/month held steady. On a positive note, its average occupancy cost declined from 19.0% in FY16 to 18.7%.
Rental reversions were lower by 1.7% for the full-year, similar to its 9M17 figure, which implies that rental changes were flattish in 4Q17. Excluding Bedok Mall and Westgate, rental reversions for FY17 would have increased slightly by 0.2%.
Portfolio occupancy remained high at 99.2%. Management highlighted during the analyst briefing that the Funan redevelopment project may be completed ahead of its initial 4Q19 target, while enquiries have been strong.
CapitaLand Mall Trust is hoping to achieve a pre-commitment level of 70% by year end. It remains on track to meet or even exceed its 6.5% ROI target. Encouragingly, management also pointed out that it has seen an improvement in discretionary spending at its malls.

We fine-tune our assumptions after taking into account CapitaLand Mall Trust’s full-year results, and raise our FY18 and FY19 DPU forecasts by 0.7% and 1.0%, respectively. This is attributed to lower finance costs, but partially offset by lower revenue assumed at Lot One Shoppers’ Mall.
Rolling forward our valuations, we derive a higher fair value estimate of S$2.26 (previously S$2.20).
Maintain BUY on CapitaLand Mall Trust.

Wong Teck Ching Andy CFA OCBC Investment | http://www.ocbcresearch.com/ 2018-01-25

OCBC Investment SGX Stock Analyst Report BUY Maintain BUY 2.26 Up 2.200