CapitaLand Mall Trust - CIMB Research 2016-04-18: Decelerating rental momentum

CapitaLand Mall Trust - CIMB Research 2016-04-18: Decelerating rental momentum CAPITALAND MALL TRUST C38U.SI 

CapitaLand Mall Trust - Decelerating rental momentum 

  • Results in line, 1QFY16 DPU accounts for c.25% of our full-year forecast. 
  • Higher Bedok Mall and IMM Building contributions offset lower income from JCube and Rivervale Mall sale. 
  • Rental reversions are likely to be very modest for upcoming leases. 
  • Impact of Funan Mall to be felt in the medium term, near-term catalysts lacking. 
  • Maintain Hold, with a target price of S$2.15. 

Results in line, 1QFY16 DPU +1.9% yoy 

  • CT’s 1QFY16 DPU of 2.73 Scts, +1.9% yoy, was in line with expectations and made up c.25% of our full-year estimate. 
  • The results were underpinned by a 7.4% expansion in gross revenue, thanks to contributions from Bedok Mall and higher income from the IMM Building. This helped to offset the lower income from JCube and income vacuum from Rivervale Mall, divested earlier. 
  • Distribution income was 4.2% higher yoy to S$96.7m, after a S$18.5m income retention. 

Positive, although slowest rental uplift for renewals 

  • CT continued to enjoy positive rental reversion, albeit at the slowest average rate of 1.4% (since 2007) for the 205,287sf (4.7% of portfolio NLA) of space renewed. This moderated pace was partly due to negative reversions at The Atrium @ Orchard, Westgate and other assets such as JCube and Sembawang Shopping Centre

Portfolio occupancy remained high at 97.7%. 

  • Meanwhile, shopper traffic grew by 4.9% and tenant sales by 4.6% yoy as most trade sectors reported a better performance yoy. 
  • Expect similar impact for upcoming expiring leases CT has 18.6% of gross rental income to be renewed for the rest of 2016 and 30.1% for 2017. 
  • The bulk of leases expiring are from IMM, Raffles City, Tampines Mall, Bugis Junction and Plaza Singapura. These properties enjoyed positive rental uplift in 1Q ranging from 0.3% to 6.3% for renewal leases and we anticipate that it could remain slightly positive for the remainder of expiring leases. 

Redeveloping Funan IT Mall for the next three years 

  • CT plans to close Funan IT Mall for 3 years from Jul 2016 for redevelopment into a new generation integrated development and leading lifestyle destination. About 388,000sf GFA will be added to create a sizeable 870,000sf property. 
  • No details have been revealed on the cost and the theme of the development. As such, we have not imputed any impact from this exercise into our current numbers. 
  • CT’s gearing is at 35.4% and appears to provide sufficient debt headroom to fund this redevelopment exercise. 

Maintain Hold 

  • We retain our Hold rating with an unchanged DDM-based target price of S$2.15. 
  • The stock offers a total return of c.4%. 
  • Our current estimates have not included any forward accretion from redeveloping Funan Mall, which would be felt only in 2-3 years’ time. As such, we retain a Hold due to the lack of short-term catalysts.

LOCK Mun Yee CIMB Securities | 2016-04-18
CIMB Securities SGX Stock Analyst Report HOLD MAINTAIN HOLD 2.15 Same 2.15