CapitaLand Mall Trust - DBS Research 2018-10-25: Leading The Pack


CapitaLand Mall Trust - Leading The Pack

  • CapitaLand Mall Trust's 3Q18 DPU of 2.92 Scts (in line).
  • Strong operational performance paints a positive picture for the retail sector.
  • Full speed ahead in 2019 as CMT rides on twin growth engines to accelerate DPU growth momentum.
  • Maintain BUY; S$2.45 Target Price.

What’s New

3Q18 DPU of 2.92 Scts

  • CapitaLand Mall Trust (CMT) delivered a solid 3Q18, backed by strong operating performance. 3Q18 DPU of 2.92 Scts (+3.9% q-o-q, +5% y-o-y).
  • For 9M18, DPU of 8.51 Scts (+3% y-o-y) formed 75% of our full-year forecasts and was in line.
  • The growth in distributions was mainly driven by organic improvements - which were captured at both the top-line and NPI levels, as well as lower borrowing costs.
  • 3Q18 NPI rose 1.1% y-o-y to S$122.7m on the back of a 0.7% increase in gross revenues.

Gearing inches higher, but maintains balanced debt profile

  • Excluding NAV slightly to S$21.99 in the previous cushion the impact of an uptick result, gearing rose 31.5% (2Q) to 7% (3Q).
  • Average debt held firm at 35.2 years.

Continual operating improvements offer glimpse into recovering retail outlook

  • Broad-based NPI uplift across CMT’s mall portfolio more than offset the income vacuum left by the sale of Sembawang Shopping Centre in June 2018.
  • NPI growth for the respective malls ranged between 0.6% and 10.3% y-o-y, offsetting the 4.9% y-o-y decline at The Atrium @ Orchard.
  • Major malls such as Bedok Mall, Junction 8, IMM Building, Plaza Singapura and Tampines Mall registered strong NPI growth of 10.3%, 9.8%, 6.1%, 2.5% and 2% respectively, anchoring the strong operating performance this quarter.
  • Portfolio occupancy was lifted slightly to 98.5% from 98% in the previous quarter.
  • Portfolio rental reversions fared similarly to previous quarters, +0.6% in 3Q18, a sign that pressures in the retail space are bottoming out. The reversal of tenant sales trends back into positive territory for 9M18 further affirms this.
  • While rental reversions at selected assets remained negative on the back of tactical tenant remixing strategies, the continued moderation in negative reversions at Westgate (-0.5% for 9M18 vs -3.3% in 1Q18) further affirms our view that CMT’s proposed acquisition of Westgate has come at an opportune time.

Twin engines propelling DPU growth

  • Looking ahead into Westgate of Funan would help the coming years.

Carmen TAY DBS Group Research | Derek TAN DBS Research | 2018-10-25
SGX Stock Analyst Report BUY MAINTAIN BUY 2.450 SAME 2.450