CapitaLand Mall Trust - RHB Research 2015-10-19: Lofty Valuation On Divestment

CapitaLand Mall Trust - RHB Research 2015-10-19: Lofty Valuation On Divestment CAPITALAND MALL TRUST C38U.SI 

CapitaLand Mall Trust - RHB Research 2015-10-19: Lofty Valuation On Divestment

  • We like the latest divestment of Rivervale Mall as its selling price represents a lofty valuation of SGD190.5m, or a 64.2% premium. 
  • Maintain BUY with a SGD2.42 TP (20% upside). 
  • The transaction, priced at an estimated cap rate of 3.8%, is significantly lower than its recent acquisition of Bedok Mall with an implied yield of ~5.1%. 
  • No material impact to its financials as it constitutes ~1% of portfolio valuation. 

 Latest development of CMT.

  • CapitaLand Mall Trust (CMT) announced its divestment of its non-core asset, Rivervale Mall, to a private equity fund (AEW Asia with asset under management (AUM) of ~USD48.9bn) for SGD190.5m, translating to SGD2,347 psf. The mall, completed in 2001, was fully occupied as at 30 Sep 15. Its major tenants include NTUC, Daiso (4046 JP, NR) and McDonald’s (MCD US, NR). 

 Advantages to divest Rivervale Mall at a hefty valuation. 

  • In our opinion, the divestment of Rivervale Mall is highly priced. The price tag of SGD190.5m is 64.2% higher than its latest valuation of SGD116.0m as at 31 Dec 14. We also estimate the mall’s RNAV at ~SGD130m, is also significantly lower (46.5%) than its divestment price. We estimate the implied cap rate of the divestment at approximately 3.8%, is lower than its latest Bedok Mall acquisition with an implied yield of 5.1%. 

 No significant impact on financials. 

  • The divested asset constituted only about 1% of the REIT’s overall total deposited property value. Therefore, there would be no material impact on the overall financial performance and distribution per unit (DPU). 

 Why we like this divestment? 

  • Firstly, the selling price of Rivervale Mall represents a 64.2% premium to its latest valuation. We think the lofty price represents a rare opportunity that is hard to come by for the REIT. 
  • In addition, CMT would realise a gain of ~SGD72m from the divestment, which would also enhance CMT’s financial flexibility. 
  • Lastly, we think that it is a good opportunity for the REIT to divest its non-core asset, especially when Rivervale Mall is facing competition from Seletar Mall, which spans > 2x its net lettable area of the former.

Ivan Looi RHB Securities | Ong Kian Lin RHB Securities | 2015-10-19
RHB Securities SGX Stock Analyst Report BUY Maintain BUY 2.42 Same 2.42