CapitaLand Mall Trust - CIMB Research 2015-12-09: Newly acquired Bedok Mall to contribute from 4Q15 onwards

CapitaLand Mall Trust - CIMB Research 2015-12-09: Newly acquired Bedok Mall to contribute from 4Q15 onwards CAPITALAND MALL TRUST C38U.SI 

CapitaLand Mall Trust - Newly acquired Bedok Mall to contribute from 4Q15 onwards 

  • CT was 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. Post-completion, we expect AEIs to be accretive. 
  • Notwithstanding the anaemic retail spending, CT’s malls produced shopper traffic and tenant sales growth in 3Q15. 
  • New contributions to be felt from Bedok Mall; recent divestment of Rivervale Mall improves financial flexibility. 
  • Maintain Add call, with an unchanged DDM-based target price. 

Flat NPI 

  • CT’s NPI was flat yoy as lower contributions from IMM, JCube and Clarke Quay 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. 

AEIs to hold up rents 

  • As at end-Sep 15, portfolio occupancy was down 2% pts qoq to 96.8% due to assetenhancement 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% in 3Q15 vs. 4.6% in 2Q15. However, tenant sales expanded 4.4% yoy for 9M15, 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 4Q15 onwards 

  • 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 an FY14 NPI yield of 5.1%, with potential reversion upside from its first rental renewal cycle from FY17 onwards. 
  • CT also announced the divestment of Rivervale Mall for S$190.5m or at a 64% premium over its latest book value. This should improve the group’s financial flexibility, including giving it the ability to pare down gearing. 

Maintain Add rating 

  • We maintain our Add rating with an unchanged DDM-based target price of S$2.28. 
  • A rerating catalyst could come from reassessing its options for Funan Mall. Apart from selling it, the trust could redevelop the property to optimise the unutilised GFA.

LOCK Mun Yee CIMB Securities | 2015-12-09
CIMB Securities SGX Stock Analyst Report ADD MAINTAIN ADD 2.28 Same 2.28