CapitaLand Mall Trust - OCBC Investment 2016-04-18: Still holding the fort

CapitaLand Mall Trust - OCBC Investment 2016-04-18: Still holding the fort CAPITALAND MALL TRUST C38U.SI 

CapitaLand Mall Trust: Still holding the fort 

  • 1Q16 DPU grew 1.9% YoY 
  • Robust footfall and tenants’ sales 
  • But rental reversions moderated 

1Q16 results met our expectations 

  • CapitaLand Mall Trust (CMT) reported a 7.4% YoY increase for its 1Q16 gross revenue to S$179.8m and this formed 25.2% of our FY16 forecast. 
  • Growth was largely driven by the acquisition of Bedok Mall on 1 Oct 2015 which contributed S$14.6m of revenue during the quarter, coupled with higher rental income from IMM following the completion of its phase two AEI. 
  • DPU grew at a slower pace of 1.9% YoY to 2.73 S cents and constituted 23.9% of our full- year projection. We attribute this to a larger unit base and S$12.0m of its taxable income available for distribution which was retained, versus S$8.0m in 1Q15. 
  • CMT has committed to distribute the taxable income retained to its unitholders in FY16. If we add back the amount retained, CMT’s 1Q16 adjusted DPU would have increased 5.4% YoY. 
  • Results were in-line with our expectations. 

Robust footfall and tenant sales figures 

  • CMT showcased its resilience by recording an increase of 4.9% YoY for its shopper traffic in 1Q16, while its tenants’ sales psf per month grew 4.6%. 
  • Occupancy at its malls was also stable at 97.7%, as at 31 Mar 2016, a mild increase of 0.1 ppt sequentially. However, CMT experienced a continued moderation in its rental reversion trend, as the increase in rental rates came in at 1.4% (FY15: 3.7%). 
  • The main drag came from The Atrium@Orchard, Westgate and other assets (comprising Sembawang Shopping Centre and JCube), which saw negative rental reversions of 11.2%, 12.9% and 7.9%, respectively. 

Maintain HOLD 

  • As a result of the challenging retail leasing environment, CMT will continue to reinvigorate its portfolio. This includes plans to redevelop Funan DigitaLife Mall (Funan) into an integrated development at the heart of Singapore’s Civic and Cultural District, which is in-line with the government’s efforts to revitalise the area. Funan’s GFA would be increased from 482,000 sq ft to ~ 870,000 sq ft post completion. 
  • Maintain HOLD and S$2.10 fair value on CMT, as we believe the market has already priced in its resiliency.

Wong Teck Ching Andy CFA OCBC Securities | 2016-04-18
OCBC Securities SGX Stock Analyst Report HOLD Maintain HOLD 2.10 Same 2.10