2Q15: Results Of AREIT, ART, CMT, FCT In Line With Expectations (Continue)
CapitaMall Trust (CT SP) HOLD (Target:S$2.17)
• Results in line; maintain HOLD with an unchanged target price of S$2.17.
- 2Q15 DPU of 2.17 S cents was down 0.7% yoy mainly due to ongoing asset enhancement works in IMM Building and Bukit Panjang Plaza, and lower occupancy at JCube and Clarke Quay.
- The results are in line with our expectations accounting for 25.4% of our full-year forecast.
- We maintain HOLD with an unchanged target price of S$2.17 based on DDM (required rate of return: 6.8%, terminal growth: 1.8%).
• Operational highlights.
- Shopper traffic increased by 3.4% yoy with new leases/renewals achieving 4.6% positive rental reversion (2014: 6.1% yoy). Tenants’ sales psf increased by 2.9% yoy.
- Portfolio occupancy slid 0.8ppt to 96.4% (1Q15:97.2%) mainly due to AEI works.
- CMT’s average cost of debt and aggregate leverage were 3.3% (1Q15: 3.5%) and 33.7% (1Q15:33.8%) respectively.
• Bedok acquisition to increase penetration in heartlands and diversify revenue.
- CMT recently announced the acquisition of Bedok Mall from CapitaLand for S$783.1m. The acquisition would extend CMT's heartlands footprint to the heart of Bedok and increase its exposure to necessity spending from 74.5% to 76.2%.
- In addition, gross revenue from any single property within the portfolio is expected to decrease from 12% to 11.2%, leading to greater diversification and less reliance.
• The retail environment is expected to remain challenging from the increased supply, rising costs and threat from alternative retail channels.
- The portfolio rent reversion dropped below the 5% level for the first time in five years. JCube saw a negative rental reversion of 13.5% as the group reconfigured the tenant mix.
• AEI update.
- CMT announced that Plaza Singapura will undergo an approximately S$38m rejuvenation of its interior from 3Q15 to 4Q16. Of the 57,000 sf of space vacated by LifeBrandz in Clarke Quay, about 51,000 sqf of space will be taken up by Zouk – one of the world’s top dance clubs and the remaining space will be carved into six pieces.
Frasers Centrepoint Trust (FCT SP) HOLD (Target:S$2.23)
• Results in line; maintain HOLD with an unchanged target of S$2.23.
- 9MFY15 DPU of 8.749 S cents in line with expectations at 75.2% of full-year estimates.
- 3QFY15 DPU of 3.036 S cents grew 0.4% as top-line growth of 16.1% was somewhat offset by the 20.2% rise in property expenses.
- The increase in property expenses was mainly attributable to the inclusion of Changi City Point to the portfolio.
- We maintain HOLD with an unchanged target price of S$2.23 based on DDM (required rate of return: 6.8%, terminal growth: 1.8%).
- Entry price is at S$1.90.
• Operational highlights.
- The latest quarter saw average portfolio rental reversions of 5.3% (2QFY15 3.8%).
- Overall occupancy fell 0.6ppt to reach 96.5% this quarter.
- By NLA, 7.1% of leases are due to expire in the next quarter, with another 28% by NLA due in FY16.
- Gearing inched up slightly, hitting 28.7% this quarter (2QFY15 28.6%).
- Costs of borrowing fell 0.5ppt qoq, reaching 2.3% in 3QFY15.
- Tenants in the fashion (15.3%), household (8.7%) and education/services (8.7%) industries comprise the largest take-up within the portfolio by NLA.
• Management remains concerned over slowing retail sales growth, coupled with increasing manpower shortages.
- In addition, the upcoming supply of shopping malls is particularly severe in the suburban space.
• Acquisitions to drive growth.
- FCT's very comfortable gearing level places in it in prime position for inorganic growth.
- Assuming gearing of 40%, we estimate debt headroom at S$468.6m.
- Medium-term growth will likely come from the acquisition of Waterway Point and NorthPoint extension from its parent once the malls are completed and stabilised.
PEER COMPARISON
(Vikrant Pandey, Derek Chang)
Source: http://research.uobkayhian.com/
