CapitaLand Mall Trust - OCBC Investment 2018-04-23: Decent Results, Great Divestment

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CAPITALAND MALL TRUST C38U.SI

CapitaLand Mall Trust - Decent Results, Great Divestment

• CapitaLand Mall Trust 1Q18 DPU +1.8% y-o-y.
• Rental reversions +0.8%.
• Est. exit yield of 2.8%-3%.

1Q18 results within our expectations

• CapitaLand Mall Trust (CMT) reported its 1Q18 results which met our expectations. Gross revenue and DPU both increased 1.8% y-o-y to S$175.2m and 2.78 S cents, and formed 25.3% and 24.8% of our FY18 forecasts, respectively.
• Management had retained S$9.1m of its taxable income available for distribution to unitholders (1Q17: S$5.0m), which would be distributed out in the subsequent quarters of FY18. 
• Rental reversions came in positive at 0.8%, versus -1.7% in FY17. However, shopper traffic declined 2.1% y-o-y, while tenants’ sales psf/month was stable (- 0.2% y-o-y). 
• Overall portfolio occupancy was 98.9%, as at 31 Mar 2018, slightly lower than the 99.2% registered as at end-FY17.

Remarkable track record of astute divestments

• CapitaLand Mall Trust (CMT) has entered into an agreement to sell its Sembawang Shopping Centre (SSC) for S$248.0m to a JV between Lian Beng Group and Apricot Capital Pte Ltd. This represents a significant premium at almost twice the valuation of the property (S$126.0m), as at 31 Dec 2017. The divestment is expected to generate net proceeds amounting to S$245.6m and CMT would be able to register a net gain of ~S$119.6m upon completion, which is expected on or about 18 Jun this year.
• We estimate that SSC constituted ~2% of CMT’s FY17 gross revenue and the divestment would be transacted at an attractive estimated exit yield of 2.8%-3%. This deal exemplifies management’s continued strong track record of unlocking value for its unitholders.
• In Oct last year, CMT completed the divestment of the serviced residence component in the Funan integrated development at a net gain of S$20.6m. Prior to this, management sold Rivervale Mall in 2015 at a 64.2% premium to its valuation and thus realised a gain of S$72.0m.
• We factor in the proposed SSC divestment in our model and assume that the net proceeds would be used to pare down its debt. Our FY18 and FY19 DPU forecasts are raised by 0.5% and 0.3%, respectively. However, our fair value of S$2.26 remains unchanged.

Wong Teck Ching Andy CFA OCBC Investment | http://www.iocbc.com/ 2018-04-23

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