CapitaLand Mall Trust - OCBC Investment 2018-01-25: Potentially Earlier Boost From Funan

CapitaLand Mall Trust - OCBC Investment 2018-01-25: Potentially Earlier Boost From Funan CAPITALAND MALL TRUST C38U.SI

CapitaLand Mall Trust - Potentially Earlier Boost From Funan

  • 4Q17 DPU +0.7% y-o-y.
  • Portfolio occupancy at 99.2%.
  • Rental reversions -1.7%.

4Q17 results within our expectations 

  • CapitaLand Mall Trust (CMT) reported its 4Q17 results which met our expectations. 
  • Gross revenue and NPI grew 1.8% and 2.6% y-o-y to S$172.4m and S$119.3m, respectively. This was largely driven by higher occupancy at Bugis Junction and The Atrium@Orchard, coupled with higher carpark income, but partially offset by lower rentals at Bedok Mall. DPU for the quarter inched up 0.7% y-o-y to 2.90 S cents, as management released S$7.6m of its taxable income available for distribution retained in 1H17 to unitholders. 
  • For FY17, CMT’s gross revenue was down 1.1% to S$682.4m due largely to the absence of income from Funan, and this formed 99.8% of our forecast. DPU of 11.16 S cents represented a mild growth of 0.3% and met 100.4% of our full-year projection.

Funan redevelopment gaining good traction 

  • Operationally, CapitaLand Mall Trust’s shopper traffic slipped marginally by 0.3% in FY17, while tenants’ sales psf/month held steady. On a positive note, its average occupancy cost declined from 19.0% in FY16 to 18.7%. 
  • Rental reversions were lower by 1.7% for the full-year, similar to its 9M17 figure, which implies that rental changes were flattish in 4Q17. Excluding Bedok Mall and Westgate, rental reversions for FY17 would have increased slightly by 0.2%. 
  • Portfolio occupancy remained high at 99.2%. Management highlighted during the analyst briefing that the Funan redevelopment project may be completed ahead of its initial 4Q19 target, while enquiries have been strong.
  • CapitaLand Mall Trust is hoping to achieve a pre-commitment level of 70% by year end. It remains on track to meet or even exceed its 6.5% ROI target. Encouragingly, management also pointed out that it has seen an improvement in discretionary spending at its malls.

Maintain BUY with higher S$2.26 fair value 

  • We fine-tune our assumptions after taking into account CapitaLand Mall Trust’s full-year results, and raise our FY18 and FY19 DPU forecasts by 0.7% and 1.0%, respectively. This is attributed to lower finance costs, but partially offset by lower revenue assumed at Lot One Shoppers’ Mall
  • Rolling forward our valuations, we derive a higher fair value estimate of S$2.26 (previously S$2.20).
  • Maintain BUY on CapitaLand Mall Trust.

Wong Teck Ching Andy CFA OCBC Investment | http://www.ocbcresearch.com/ 2018-01-25
OCBC Investment SGX Stock Analyst Report BUY Maintain BUY 2.26 Up 2.200