CapitaLand Mall Trust - CIMB Research 2016-01-22: Bedok Mall drove NPI growth

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CAPITALAND MALL TRUST C38U.SI 

CapitaLand Mall Trust - Bedok Mall drove NPI growth 

• CMT’s 4Q15 DPU of 2.88 Scts in line at 26% of our forecast. 
• Earnings growth came from Bedok Mall and positive rental reversions of 3.7%. 
• Higher than peers occupancy cost could limit significant upside for lease renewals. 
• With AEI at Clarke Quay Block C completed, redevelopment of Funan Mall is in the works. 
• We cut FY16-17 EPS and shave DDM-based TP to S$2.15. Maintain Add. 

■ Earnings lift from Bedok Mall 

• CMT’s 4Q15 NPI advanced 18.6% yoy to S$125.7m on 9.2% higher revenue of S$180.4m. This was largely due to new contributions from Bedok Mall, acquired in Oct 15 and an improvement in NPI margin from utility savings. However, DPU edged up 0.7% yoy to 2.88 Scts with an expansion in unit base following the issue of consideration units to Capitaland to part pay for the Bedok Mall. 

■ Positive rental renewals, high occupancy cost could limit upside 

• In FY15, CMT renewed 838,276 sq ft of space at 3.7% higher reversion rates over the previous period. 
• Portfolio occupancy stayed fairly flat at 97.6%. Tenant retail sales psf rose 5.3% yoy with tenants in the gifts & souvenirs, toys, IT, telecoms and services performing the best. 
• Shopper traffic also increased 4.9% yoy. 

■ AEI at Clarke Quay completed with > 90% lease rate 

• With a relatively high occupancy cost of 18.5% and the competitive retail environment, we anticipate rental renewals to be fairly marginal, with 24.7% of income due to be recontracted. 
• During the quarter, reconfiguration works at Block C of Clarke Quay were completed and the property is now > 90% leased, while the Phase 2 AEI at IMM Building has been completed. This brings the total number of outlet stores to 85. 

■ Plans to redevelop Funan Mall in the works 

• In terms of the redevelopment of Funan Mall, the trust indicated that the property will continue to be opened till June 16 and that when redeveloped, the property would contain both retail and office components. 
• With the sale of Rivervale Mall, CMT’s gearing remained at a healthy 35.4%. 

■ Maintain Add 

• We maintain our Add rating with a slightly lower DDM-based target price of S$2.15. 
• The stock offers FY15-16 DPU yield of 5.5-5.6%. 
• A re-rating catalyst could come when it redevelops Funan Mall to optimise unutilised GFA.

LOCK Mun Yee CIMB Securities | http://research.itradecimb.com/ 2016-01-22

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