CAPITALAND MALL TRUST
C38U.SI
CapitaLand Mall Trust - From Retail To Experiential Malls
- We are positive on CapitaLand Mall Trust’s (CMT) plans to redevelop Funan Mall into an integrated development and pioneering new retail mall. Upside catalysts are:
- Uplift from AEIs and monetisation of Funan Mall’s office and serviced residences;
- Stable performance across its diverse mall portfolio.
- Maintain BUY, with DDM-derived TP of SGD2.36 (7% upside).
Funan mall to be redeveloped into experiential “Mall Of The Future”.
- Funan DigitaLife Mall (Funan), which closed on 30 Jun, will be redeveloped into an integrated development comprising two office towers, service residences and a retail space by 4Q19. The maximisation of plot ratio to 7.0 (previously 3.88) will add an additional 388,000 sq ft. The retail component will be redeveloped into an experiential interactive futuristic mall.
- CMT is currently in discussion with its sponsors and other parties on redevelopment plans. We think the expected ROI of 6.5% is achievable.
- We welcome the move, as we believe the retailers need to differentiate and incorporate futuristic elements to keep themselves ahead of competition and increase shopper traffic.
No need for additional fund raising.
- The total estimated redevelopment cost, including additional land charges, is estimated at SGD560m. The development will be funded internally, as the REIT’s current gearing of 35.3% provides debt headroom of ~ SGD800m (based on a maximum gearing 40%).
Positive rental reversions backed by higher tenant sales.
- 2Q16 rental reversions were up 1.7%, backed by a 3.6% YoY increase in shopper traffic and 2.3% YoY increase in tenant sales per sq ft.
- Healthy reversions were mainly in Tampines Mall, IMM building and Plaza Singapura, while there were negative reversions for Bugis+, Westgate and The Atrium@Orchard.
- Looking ahead, we expect rental reversions to remain flat to slightly positive for the rest of the year. CMT has about 8.9% of its total portfolio up for renewals during 2H16.
Maintain BUY with adjusted TP of SGD2.36 (from SGD2.37).
- We adjust our DPU estimates by 3-5% for 2016-2018, to factor in loss of income from Funan Mall.
- The impact on our DDM-derived (5-year) TP is, however, marginal, as we expect strong rental contributions post redevelopments to offset the initial drop in income.
Vijay Natarajan
RHB Invest
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http://www.rhbinvest.com.sg/
2016-07-25
RHB Invest
SGX Stock
Analyst Report
2.36
Down
2.37
