Mildly accretive acquisition
- Acquisition of Bedok Mall costs SGD795m, a tad expensive.
- Mildly DPU accretive due to 20% funding by units, rest debt.
- Raised TP to SGD1.96 from SGD1.87 on DPU accretion and higher payout ratio. Maintain SELL (DDM, CoE 7.7%, LTG 2%).
Acquisition of Bedok Mall
- CMT is set to acquire Bedok Mall (222k sf NLA, 99.3% occupied) from its parent CapitaLand for an all-up outlay of SGD795m.
- The target itself comes with a price tag of SGD783m or SGD3,506psf, valued at NPI yield and cap rate of 5.1%.
- Taking a mall of comparable size like Junction 8 (252k sf NLA) valued at SGD2,623psf and cap rate 5.35%, the acquisition is on the expensive side.
- That said, Bedok Mall has the following advantages that could justify the slightly compressed cap rate:
- land tenure of 95 years vs Junction 8’s 74,
- premium passing rents of SGD19.8psf vs SGD17.4psf (no anchors needed), and
- shopper traffic of 16.8m that could grow significantly (vs 31.2m) given that Bedok is Singapore’s largest estate of 294k people vs 179k in Ang Mo Kio, where Junction 8 is located.
- The mall is well located as a transport node with bus interchange and MRT station, and has little by way of competition apart its underperforming neighbour, Bedok Point.
DPU accretive next year, not this. Maintain SELL.
- Planned for completion by 4Q15, this raises our FY15-17 NPI forecasts by 3.5%/10%/9.5%.
- Financing is SGD632.4m debt (aggregate gearing to rise from 33.8% to 37.2%) and the remainder by issue of ~75.6m units based on 10 day VWAP (illustrative price SGD2.15).
- Due to the 2.5% dilution involved, our FY15 DPU would stagnate at SGD10.7cts while FY16 accretes by SGD0.3cts to SGD11.2cts.
- We thus raise our payout ratio from 91% to 93% for stronger FY15-17 DPUs of SGD 10.9/11.5/11.8cts.
- The increased distribution raises our TP from SGD1.87 to SGD1.96 implying a 9.4% downside from here.
- Maintain SELL.
- Forward yields are still not compelling at 5.1-5.4%.
(Joshua Tan)
Source: http://www.maybank-ke.com.sg
