CapitaLand Mall Trust (CT SP) - UOB Kay Hian 2018-04-23: 1Q18 Signs Of Stabilisation In The Retail Scene

CapitaLand Mall Trust (CT SP) - UOB Kay Hian 2018-04-23: 1q18 Signs Of Stabilisation In The Retail Scene CAPITALAND MALL TRUST C38U.SI

CapitaLand Mall Trust (CT SP) - 1Q18 Signs Of Stabilisation In The Retail Scene

  • Rental reversions turned positive in 1Q18, primarily due to Plaza Singapura, Junction 8 and Lot One Shoppers’ Mall. 
  • Although both shopper traffic and occupancy declined marginally, retail rents showed signs of stabilisation. Rents across Orchard and suburban areas have also turned positive for the first time in 12 and 16 quarters respectively. 
  • Maintain HOLD with an unchanged target of S$2.13. Entry price: S$1.81.


Results in line with expectations.

  • CapitaLand Mall Trust (CMT) posted a 1Q18 DPU of 2.78 S cents, up 1.8% y-o-y. 1Q18 gross revenue and NPI grew by 1.8% and 4.7% y-o-y, due to higher occupancy at IMM Building, Clarke Quay, The Atrium@Orchard, and Plaza Singapura, as well as higher car park income. The results came in line with our expectations, with 1Q18 DPU representing 27.6% of our full-year estimate.


  • Shopper traffic declined (2.1% y-o-y), to about 83m in 1Q18, excluding Funan. We also saw tenant sales decline marginally by 0.2% y-o-y, to around S$80 psf pm.
  • Portfolio-wide occupancy remained healthy. Portfolio-wide occupancy declined only marginally to 98.9% (vs 4Q17: 99.2), with the exclusion of Funan. Raffles City Singapore (-1.5%), Westgate (-0.8%), IMM (-0.6%), Plaza Singapura (-0.4%), Lot One (-0.1%) and Tampines Mall (-0.1%) saw declines in occupancies.
  • Tenant sales led by music & video, electrical & electronics, and sporting goods segments, which saw 1Q18 y-o-y growth of 26.2%, 14.9%, and 13.7% respectively. In terms of declines in 1Q18, toys & hobbies, leisure & entertainment, and it & telecommunications segments saw the steepest declines of 25.2%, 11.3%, and 8.4%, respectively. Management also alluded that the overall consumer sentiment was cautious.
  • Rent reversion turned positive to 0.8% y-o-y in 1Q18 (vs -1.7% in 2017). Among the best performing malls were Plaza Singapura, Junction 8, Lot One Shoppers’ Mall, which saw positive reversions of 4.6%, 3.0% and 2.7%. Meanwhile, overall rent reversions were dragged by Westgate (-3.3%), Raffles City Singapore (-2.6%) and Bedok Mall (-0.9%).
  • Retail rents see stabilisation. Prime retail rents in Orchard Road (+0.5% q-o-q, -1.9% y-o-y) and Suburban (+0.5%qoq, -1.0% y-o-y) recorded their first rise after 12 and 16 quarters respectively, according to CBRE. Supply of another 1.22m sf and 1.02m sf in NLA are expected to come on stream in 2018 and 2019 respectively.
  • The retail sector is increasingly buoyed by the stronger economic fundamentals (including strong growth in tourist arrivals and retail sales), with some landlords of prime shopping malls raising their asking rents after a three-year lull and some pop-up stores converting to permanent set-ups.
  • Asset enhancement works (amounting S$8.2m) for Tampines Mall. The rejuvenation works include demolition and construction of a new food and beverage duplex, enhancement of the mall façade, and new flooring for the extended walkway, which are slated to complete by 4Q18.
  • Divestment of Sembawang Shopping Centre (S$248m) to JV between Lian Beng Group and Apricot Capital. The transacted price is attractive, which is 96.8% above the independent valuation of S$126m. This will generate net proceeds of about S$245.6m and a net gain of about S$119.6m (3.37 S cents/share).
  • Post-divestment, CMT’s portfolio will comprise of 15 properties located in suburban areas and downtown core of Singapore. Sembawang Shopping Centre was acquired by CMT in 2005. The asset had an occupancy of 99.4% as at 31 Dec 17, and comprises of 143,631 sf in NLA, featuring tenants like Giant, Yamaha Music School, Food Junction and Daiso Japan.
  • Expect more AEIs and acquisitions going forward. Other than AEI works in Tampines Mall and redevelopment at Funan, management continues to focus on asset planning to unlock value and M&A opportunities.


  • We retain our estimates.


  • Maintain HOLD with an unchanged target of S$2.13. Our valuation is based on DDM (required return: 6.7% and terminal growth of 2.0%).


  • Positive newsflow on retail rentals, tourist arrivals and mall occupancy.

Vikrant Pandey UOB Kay Hian | Loke Peihao UOB Kay Hian | 2018-04-23
SGX Stock Analyst Report HOLD Maintain HOLD 2.130 Same 2.130