CapitaLand Mall Trust - CIMB Research 2015-10-15: Sells Rivervale Mall

CapitaLand Mall Trust - CIMB Research 2015-10-15: Sells Rivervale Mall CAPITALAND MALL TRUST C38U.SI 

CapitaLand Mall Trust - Sells Rivervale Mall 

  • CT sells Rivervale Mall for S$190.5m to private equity fund. 
  • Sale price is at a 64% premium to Jun 15 book value, realising a S$72m gain. 
  • Minimal impact on earnings as property accounts for c.1% of CT’s property portfolio. 
  • Net proceeds will enhance CT’s financial flexibility. 
  • Maintain Add, with unchanged DDM-based target price of S$2.37

Sells Rivervale Mall for S$190.5m 

  • CT announced it is selling Rivervale Mall to a private equity fund managed by AEW Asia for S$190.5m. The mall is located in Sengkang New Town and has a NLA of 81,159 sf. The property has a committed occupancy of 100%, with major tenants such as NTUC, Daiso, McDonald’s, and United Overseas Bank. The deal is expected to be completed by 15 Dec 15. 

Divestment at a premium to latest book value 

  • The sale price is at a 64% premium to the latest book value of S$116m as at Jun 15. CT will realise a net S$72m gain from the sale, after divestment fee and other related expenses. No details of transaction cap rates were given. However, as at Jun 15, this property, together with Sembawang Shopping Centre, were jointly valued at a blended cap rate of 5.55-5.6%. 

Sale will enhance trust’s financial flexibility… 

  • Proceeds from the sale will enhance CT’s financial flexibility. Post transaction, we estimate that CT’s gearing will likely decline marginally to c.36% from the projected 37.4% (after acquisition of Bedok Mall). CT could use the proceeds to repay debt or fund capex or AEI. As at 2Q15, CT had outlined plans to enhance entertainment and F&B offerings at Clarke Quay, as well as to rejuvenate Plaza Singapura. 

… and facilitate steeper inorganic growth path 

  • Looking ahead, it appears that CT could be moving towards a steeper inorganic growth path. Apart from reconstituting its portfolio and increasing financial flexibility, it has also recently acquired Bedok Mall and has also signaled its intention to relook at options for Funan Mall. 

Maintain Add 

  • We tweak our FY16 and FY17 earnings forecasts marginally, by 0.2%, to factor in the loss of earnings from the sale, offset by interest savings, assuming the proceeds will be used to repay borrowings. However, our DDM-based target price of S$2.37 is unchanged given that the disposed property makes up only 1% of the trust’s property portfolio value. 
  • We retain our Add rating.

LOCK Mun Yee CIMB Securities | http://research.itradecimb.com/ 2015-10-15
CIMB Securities SGX Stock Analyst Report ADD Maintain ADD 2.37 Same 2.37