CapitaLand Mall Trust - OCBC Investment 2017-10-23: Stable Results Amid Improved Consumer Sentiment

CapitaLand Mall Trust - OCBC Investment 2017-10-23: Stable Results Amid Improved Consumer Sentiment CAPITALAND MALL TRUST C38U.SI

CapitaLand Mall Trust - Stable Results Amid Improved Consumer Sentiment

  • 3Q17 DPU unchanged YoY.
  • Higher portfolio occupancy.
  • Slight 1.7% dip in rental reversions.

3Q17 results within our expectations 

  • CapitaLand Mall Trust (CMT) reported a stable set of 3Q17 results which met our expectations.
  • Although gross revenue fell marginally by 0.2% YoY to S$169.4m, NPI rose 1.6% to S$121.4m due to lower property tax and utility expenses. This translated into a NPI margin of 71.6% (+1.2 ppt YoY). DPU was unchanged at 2.78 S cents.
  • On a 9M17 basis, CMT recorded gross revenue of S$510.1m, which was a decline of 2.0% and represented 74.6% of our FY17 forecast. DPU was flat at 8.26 S cents (+0.1%) and accounted for 74.7% of our full-year projection.
  • Management had retained S$7.6m of its taxable income available for distribution in 9M17, or ~0.214 S cents per unit (9M16: S$12.0m), which is expected to be distributed to unitholders in 4Q17.

Rental reversions remain negative, but more upbeat sentiment 

  • CMT saw a slight negative rental reversion of 1.7% for 9M17 (1H17: -1.6%), with the main drag coming from Westgate (-10.5%), Bedok Mall (- 6.0%) and Tampines Mall (-4.3%). The negative rental reversion at Tampines Mall was attributed to a change in tenant mix for a lease from banking to F&B. 
  • Looking ahead, CMT only has 3.1% of its gross rental income expiring in 4Q17, but a potential risk could come from the 30% of expiries due in 2018, which include 17 anchor and mini-anchor tenant leases. There is a likelihood of a change in trade mix for some of these leases as CMT seeks to reposition its malls.
  • Shopper traffic (+0.2%) and tenants’ sales psf per month (flat) were stable in 9M17, but overall portfolio occupancy saw a slight uptick from 98.6% (as at 30 Jun 2017) to 99.0%. Management noted a slight improvement in consumer sentiment, and this was also reflected in Singapore’s retail sales index excluding motor vehicles (+2.0% and +3.7% YoY in Jul and Aug, respectively).

Maintain BUY 

  • We fine-tune our assumptions, which include lowering our finance cost projections due to the expected repayment of borrowings from CMT’s divestment of the serviced residence component in the Funan integrated development. 
  • Our FY17 and FY18 DPU forecasts are lifted by 0.5% and 0.4%, respectively. 
  • Maintain BUY on CMT with an unchanged fair value estimate of S$2.20.

Wong Teck Ching Andy CFA OCBC Investment | 2017-10-23
OCBC Investment SGX Stock Analyst Report BUY Maintain BUY 2.20 Same 2.20