CapitaLand Mall Trust - OCBC Investment 2017-04-21: Stable DPU But Rental Reversions Turned Negative

CAPITALAND MALL TRUST C38U.SI

CapitaLand Mall Trust - Stable DPU but rental reversions turned negative

CapitaLand Mall Trust (CMT) reported a 4.3% YoY decline in its 1Q17 gross revenue to S$172.0m, while NPI dipped 6.1% to S$120.1m, and these formed 25.1% and 25.0% of our FY17 forecasts, respectively. The weaker performance can be attributed largely to the absence of contribution from Funan, which was closed for redevelopment from 1 Jul 2016. Funan had contributed S$5.6m to CMT’s NPI in 1Q16.
Besides Funan, there were declines in NPI recorded at some of its other malls such as Tampines Mall, Plaza Singapura, Bedok Mall and The Atrium@Orchard. However, DPU for the quarter came in flat YoY at 2.73 S cents, meeting 24.7% of our full-year forecast and was within our expectations.
CMT had retained S$5m of its taxable income available for distribution to unitholders for distribution in FY17, versus S$12m retained in the 1Q16. If we add back the income retained, adjusted DPU would have fallen 6.4% YoY to 2.87 S cents.

1Q17 was undoubtedly a challenging quarter for CMT, as it registered a slight dip in shopper traffic and tenants’ sales psf by 0.5% and 0.7% YoY, respectively. This was partly due to a leap year in 2016 and differences in timing of the Lunar New Year this year and last year, which affected consumers’ shopping patterns.
CMT also saw overall portfolio negative reversions of 2.3% in 1Q17 (FY16: +1.0%), with the drag coming from Westgate (-10.0%), Bedok Mall (-7.1%) and Other assets (includes Sembawang Shopping Centre and JCube; -7.8%).
Portfolio occupancy remained relatively high at 97.7%, but was lower than the 98.5% figure achieved as at end-FY16.

Given this in-line set of results, we opt to keep our forecasts unchanged.
CMT is currently trading at FY17F distribution yield of 5.5%, which is in-line with its 5-year average.
Although the operating environment is likely to remain tough, we believe CMT’s stature as a quality defensive blue-chip stock would still provide value for investors in light of geopolitical tensions and macroeconomic uncertainties. As such, we maintain our BUY rating and S$2.20 fair value estimate on CMT.

Wong Teck Ching Andy CFA OCBC Investment | http://www.ocbcresearch.com/ 2017-04-21

OCBC Investment SGX Stock Analyst Report BUY Maintain BUY 2.200 Same 2.200