CapitaLand Mall Trust - Maybank Kim Eng 2015-10-22: Tapering Reversions

CapitaLand Mall Trust - Maybank Kim Eng 2015-10-22: Tapering Reversions CAPITALAND MALL TRUST C38U.SI 

CapitaLand Mall Trust - Tapering Reversions 

  • 9M15 results in line. Revenue & NPI declined on the back of lower occupancies & tapering rent reversions. 
  • Improved shopper traffic & tenant sales not translating into stronger rent reversions. 
  • Remain cautious on retail sector. Maintain SELL, with no change to DPU or SGD1.66 TP, based on yield target of 6.75%. 

What’s New 

  • 9M15 revenue and NPI was down 1% and 0.6% YoY, confirming that times are challenging for retail-asset owners. 3Q15 revenue and NPI were SGD161.7m (-1.8% YoY, +1.3% QoQ) and SGD113.3m (-0.7% YoY, +3.5% QoQ). 
  • DPU, however, was boosted by 9.6% YoY to 2.98 Scts, by a release of retained taxable income. 
  • Drags this year have come from: 
    1. steadily weakening rent reversions, from 6.1% in FY14 to 4.1% in 9M15; and 
    2. declining portfolio occupancies, from 98.8% (FY14) to 96.8% (3Q15). 
  • The fall in occupancy was across 12 of its 16 malls. Of the 12, IMM and Bukit Panjang are under AEI in response to heightened competition. 
  • On the bright side, shopper traffic and tenant sales have rebounded, by 4.2% and 4.4% in 9M15. Still, this has not translated into a U-turn for its rent reversions. 

What’s Our View 

  • We are still cautious on retail SREITs, owing to a strong supply till 2017 (4.7m sf vs 3m historical demand), the e-commerce threat and labour restrictions driving up tenants’ operating costs. 
  • Demand is also a concern amid weak employment and income growth. 
  • No change to our forecasts as 9M15 revenue, NPI and DPU make up 74.5%/75.2%/76.9% of our FY15F. 
  • FY16 DPU should grow 3.3% from newly acquired Bedok Mall. 
  • Our TP is still SGD1.66, based on a 6.75% yield target applied to FY16 DPU. 
  • Maintain SELL.

Joshua Tan Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2015-10-22
Maybank Kim Eng SGX Stock Analyst Report SELL Maintain SELL 1.66 Same 1.66