CAPITALAND MALL TRUST
C38U.SI
CapitaLand Mall Trust - New contributions from Bedok Mall from 4Q
- 3Q top line affected by ongoing AEI works and lower occupancy, offset by lower operating expenses and reduced interest charges.
- Portfolio occupancy dipped to 96.8% on enhancement works.
- Shopper traffic and tenant sales growth produced a stronger showing in 3Q.
- New contributions to be felt from Bedok Mall; recent divestment of Rivervale Mall improves financial flexibility.
- Add recommendation maintained with a lower DDM-based target price of S$2.28.
3Q results in line
- CT reported a 9.6% rise in DPU to 2.98 Scts for 3Q15. Its 3Q/9M15 numbers are in line, making up 26%/73% of our full-year forecast. Although 3Q revenue dipped 1.8% yoy to S$161.7m, due to lower contributions from IMM, JCube and Clarke Quay, this was offset by lower property expenses, particularly from utilities, and reduced interest charges (on lower financing costs).
- There was also a release of income retained earlier. Performance dragged by AEI Portfolio occupancy was down 2 percentage points qoq to 96.8% due to asset enhancement works and reconfiguration works at IMM, Bukit Panjang Plaza, Clarke Quay and JCube. Post these makeover activities, we expect occupancy to improve.
- AEIs completed include the conversion of L5 open roof to a new education hub at Tampines Mall. H&M also opened its store in the mall, its first in the eastern part of Singapore.
Better shopper traffic and tenant sales growth
- The leasing environment remains competitive, with rental reversions averaging a lower 4.1% over preceding levels (vs 4.6% in Q2). However, tenants sales expanded 4.4% yoy for 9M, with 3Q showing stronger estimated growth of 7.9%.
- Shopper traffic also grew 4.2% for 9M, with 3Q performance coming in at an estimated stronger 5.8%. With a remaining 4.9% and a further 27.5% of rental income to be renewed in 4QFY15 and FY16, respectively, we anticipate the earnings outlook to remain stable.
New contributions from Bedok Mall to be felt from 4Q
- Going into 4QFY15, we expect earnings to be lifted by a full quarter’s contributions from the recent acquisition of Bedok Mall. The mall was purchased at a FY14 NPI yield of 5.1% with potential reversion upside from its first rental renewal cycle from FY17.
- CT also announced the divestment of Rivervale Mall for S$190.5m, or at a 64% premium to latest book value. This should improve the group’s financial flexibility including paring down gearing.
Add rating maintained
- We maintain our Add rating with a slightly lower DDM-based target price of S$2.28. The stock offers FY15-16 DPU yield of 5.5-5.6%.
- A re-rating catalyst could come from reassessing its options for Funan Mall. Apart from disposal, it could also redevelop the property to optimize the unutilized GFA. .
LOCK Mun Yee
CIMB Securities
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http://research.itradecimb.com/
2015-10-22
CIMB Securities
SGX Stock
Analyst Report
2.28
Down
2.37
