CAPITALAND MALL TRUST
SGX:C38U
CapitaLand Mall Trust - Positive Rental Reversion In 1HFY18
- CapitaLand Mall Trust's 1H18 DPU of 5.6 Scts was in line with our FY18 forecast.
- Growth was driven by positive rental reversion (+0.8% y-o-y) and lower expenses.
- Occupancy remained high at 98% while retention rate was 83.3% in 1H18.
- Continuous asset enhancement should help to drive growth.
- Downgrade from Add to HOLD with a lower target price of S$2.21.
2Q18 results in line
- CapitaLand Mall Trust’s 1H18 DPU of 5.6 Scts (+2.0% y-o-y) was in line with our expectations, at 49.9% of our full-year forecast.
- The growth was underpinned by a 1.7% y-o-y expansion in gross revenue, driven by higher gross rental income from Sembawang Shopping Centre which was divested on 18 Jun 2018.
- This, plus lower marketing expenses and utility cost, led to stronger bottomline growth.
Positive rental reversion
- CapitaLand Mall Trust registered a rental reversion of +0.8% y-o-y (flat q-o-q) in 1H18 from the renewal of 13.6% of its NLA. If not for the negative rental reversion reported by Westgate and Bedok Mall, its overall rental reversion would have been +1.6% y-o-y.
- While Bedok Mall continued to perform poorer q-o-q, Westgate’s rental reversion improved from -3.3% in 1Q to -2.1% in 1H18. Management indicated that it is changing the tenant mix of Bedok Mall to improve the rental yield.
- Retention rate was better at 83.8% in 1H18 vs. 82.9% in 1Q18.
Occupancy rate remained high
- Occupancy rate remained high at 98% as at 30 Jun although it was lower vs. 99.2% at 31 Dec 2017.
- Clarke Quay occupancy rate declined 95.3% over the same period, we understand that has improved in recent months as CapitaLand Mall Trust signed up new leases. The trust has a remaining 9.2% of NLA expiring in 2018, the bulk of which will be at IMM Building, Plaza Singapura and Lot One Shoppers Mall.
Continuous effort to increase yield
- CapitaLand Mall Trust plans to rejuvenate Westgate by enclosing selected F&B outlets with air-conditioning and improving shopper accessibility into the Mall and from Level 1 to Level 2. It is also doing asset enhancement initiative (AEI) works at Tampines Mall which will be completed by 4Q18.
- Funan Digital Mall, which is currently under redevelopment, may reopen earlier than expected due to the strong tenant demand and good construction progress.
Strong balance sheet
- Gearing level remained healthy at 31.5% as at 30 Jun 2018 while cost of debt was lower at 3.1% in 2Q18 vs. 3.2% in the previous quarter. With a strong balance sheet, the trust is in a good position for acquisitions or to further enhance its existing assets.
Downgrade on valuation
- While we maintain our FY18-20 DPU estimates, we reduce our DDM-based target price from S$2.25 to S$2.21 as we increase our risk-free rate to be in line with the market rate. The stock price has increased more than 5% since mid-Jun. With less than a 10% total return, we downgrade the stock from Add to HOLD.
- Upside risks could come from better-than-expected results from AEIs, while downside risks include a slower recovery in rental reversions.
LOCK Mun Yee
CGS-CIMB Research
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https://research.itradecimb.com/
2018-07-20
SGX Stock
Analyst Report
2.251
Down
2.250
