CapitaLand Mall Trust - OCBC Investment 2015-12-11: Solid blue chip attractively priced

CapitaLand Mall Trust - OCBC Investment 2015-12-11: Solid blue chip attractively priced CAPITALAND MALL TRUST C38U.SI 

CapitaLand Mall Trust: Solid blue chip attractively priced 

 Valuations attractive 
 FY16F yield +1.5 SD above 5-year mean 
 Expect stable DPU growth 

Risk reward compelling 

  • Following CapitaLand Mall Trust’s (CMT) recent share price weakness, we believe its risk-reward is now compelling, with the stock trading at 6.0% FY16F distribution yield. This is 1.5 standard deviations above its 5-year forward average of 5.5%. 
  • From a book value perspective, CMT’s FY16F P/B ratio is 1.06x, and this is also attractive, in our view, as it is close to 1.5 standard deviations below its 5-year forward mean of 1.16x. 

Seeking to unlock asset value 

  • CMT’s management is constantly seeking to enhance the value of its portfolio by carrying out asset rejuvenation works and tenant repositioning exercises to make its malls more relevant to consumers. 
  • An example of this is Tampines Mall, whereby CMT reconfigured its second and third level to boost its fashion offerings, bringing in new tenants such as H&M. It is also speeding up phase two of its AEI at IMM Building. 
  • More recently, CMT announced its plans to redevelop Funan DigitaLife Mall into an integrated development, given its untapped GFA of ~388,000 sqft. As a result of this, the mall is expected to be closed in 3Q16, and redevelopment works will take approximately three years. 

Still room for growth 

  • While we are cognisant of challenges facing retail landlords, we expect CMT to continue delivering stable growth to its unit holders. 
  • We forecast DPU growth to come in at 2.3% and 2.5% for FY15 and FY16, respectively, partly driven by contribution from its recent Bedok Mall acquisition. 
  • We have a BUY rating on CMT, with a fair value estimate of S$2.09. This translates into an expected total potential returns of 16%.

Wong Teck Ching Andy OCBC Securities | http://www.ocbcresearch.com/ 2015-12-11
OCBC Securities SGX Stock Analyst Report BUY Maintain BUY 2.09 Same 2.09