CapitaLand Mall Trust - CIMB Research 2017-10-20: Stable Quarter

Stable Quarter - CIMB Research 2017-10-20: CapitaLand Mall Trust CAPITALAND MALL TRUST C38U.SI

Stable Quarter - CapitaLand Mall Trust

  • CapitaLand Mall Trust (CMT)'s 3Q17 DPU of 2.78 Scts was flat yoy, and accounted for 26% of our FY17F forecast.
  • Shopper traffic and tenant sales held steady, rental reversions negative but stabilising.
  • One-third of rental to be renewed annually in FY18/19, expect modest upside.
  • Divested serviced apartment land of Funan.
  • Maintain Hold with DDM-based TP of S$2.15.

3Q17 DPU performance as expected 

  • CapitaLand Mall Trust (CT) reported a 0.3%/0.2% yoy rise in 3Q/9M distribution income to S$98.7m/S$292.9m.
  • The slight improvement was due to a slight uptick in portfolio occupancy to 99%, better cost containment and slightly lower interest expense. 
  • 3Q topline dipped 0.2% yoy on the back of closure of Funan Mall for redevelopment and lower rents for Bedok Mall, Plaza Singapura and Junction 8. 
  • 3Q/9M DPU of 2.78 Scts/8.26 Scts was in line with our expectations, accounting for 26%/76% of our FY17F forecast.

Rental reversions still negative but stabilising 

  • CapitaLand Mall Trust (CT) renewed 17.7% of NLA in 9M17 with a retention rate of 80.2%. The portfolio saw an average -1.7% in rental reversion, fairly flat compared to the -1.6% in 1H, impacted by a tenant remixing at Tampines Mall as well as continued re-juggling of the tenant mix at Westgate, Bedok Mall and Bukit Panjang Plaza. 
  • Shopper traffic improved 0.2% YTD while tenant sales held steady.

Muted rental renewal performance in the near term 

  • CapitaLand Mall Trust (CT) has a remaining 3.1% of rental income to be renewed in FY17 and another 30%/30.1% in FY18/19. Most expiries are well spread amongst the portfolio assets and include some anchor/mini anchor leases. 
  • The trend of improvement in Singapore monthly retail sales is also reflected in CT’s portfolio performance. However, with the continued tenant remixing exercise, we anticipate any rental growth to be muted for now.

De-risked service apartment land of Funan 

  • During the quarter, CapitaLand Mall Trust (CT) divested its units in Victory SR Trust, which owns the serviced component of Funan at an agreed upon land value of S$90.5m. This divestment lowers CT’s development risk and reduces funding requirements. The proceeds could be used to pare down debt. 
  • As at end 3Q17, CT’s gearing stood at 34.7% with an average cost of debt of 3.2%. An estimated 16% of its debt or cS$605m is due to be refinanced in FY18.

Maintain Hold 

  • We leave our FY17-19 DPU estimates unchanged but tweak our longer-term DPU growth marginally to factor in a more stable outlook. Accordingly, our DDM-based TP is adjusted to S$2.15. 
  • Retain our Hold call on limited near-term upside. 
  • Key upside risk is a recovery in consumer spending while downside risks include worse-than-expected negative rental reversions.

LOCK Mun Yee CIMB Research | YEO Zhi Bin CIMB Research | 2017-10-20
CIMB Research SGX Stock Analyst Report HOLD Maintain HOLD 2.15 Up 2.110