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

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

  • 1Q17 DPU flat YoY.
  • Slight dip in shopper traffic and tenant sales.
  • Rental reversions -2.3%.

1Q17 results within our expectations 

  • 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.

Largely challenging quarter 

  • 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.

Maintain BUY 

  • 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 | 2017-04-21
OCBC Investment SGX Stock Analyst Report BUY Maintain BUY 2.200 Same 2.200