RHB Research 2015-07-23: Capitaland Mall Trust - Repositioning For The Long Term. Maintain BUY.

Repositioning For The Long Term

  • CMT announced another stable set of earnings with 2Q/6M15 DPU up 0.7%/2.5% YoY, at 49% of our full-year forecasts. 
  • Maintain BUY and SGD2.42 (18% total return). 
  • The lower revenue and net property income booked for the quarter were mainly due to management’s initiative to reposition its malls, namely Clark Quay, JCube, IMM Building and Bukit Panjang Plaza. 
  • We remain positive on the retail scene as we see higher footfall count and tenants’ sales for the REIT. 

 No surprises. 

  • CapitaLand Mall Trust (CMT) reported DPU growth of 0.7%/2.5% YoY for 2Q/6M15, meeting 48.5% of our full-year estimates. 
  • As mentioned above, management is committed to repositioning its malls. These include the exit of a major tenant LifeBrandz at Clark Quay, which will be partially replaced by one of the world’s top dance clubs – Zouk by Jun 2016. 
  • We are confident of management’s restructuring strategy given CMT’s great track record in its asset enhancement initiative (AEI) works. 

 Remains positive on prospects of Jurong. 

  • We note that CMT has the largest retail presence in the western region of Singapore. 
  • Valuations for CMT’s Jurong assets, namely Westgate and JCube have fallen despite a cap rate compression of 10-15bps. This was mainly due to the near-term pressure on rents and occupancy levels. 
  • However, we remain positive on the long-term outlook, given that the Government is committed to developing Jurong Lake District (JLD) into a main regional hub outside the central region. 
  • We think that CMT could be the one of the biggest beneficiaries of JLD’s longer-term prospects. 

 Increasing footfall and tenants’ sales a great sign for the retail scene. 

  • Despite the lacklustre tourism sector, we see shopper traffic across CMT’s portfolio increased 3.4% YoY. 
  • In addition, tenants’ sales psf have also increased 2.9% YoY. 
  • We see this as a positive sign as it should provide CMT an organic avenue to increase rental fees. 

 Maintain BUY with an unchanged TP of SGD2.42. 

  • We continue to like CMT as it is committed to value adding its portfolio, such as the recent proposed acquisition of Bedok Mall. 
  • Maintain BUY. 

(Ivan Looi; Ong Kian Lin) 

Source: http://www.rhbgroup.com/