CapitaLand Mall Trust - OCBC Investment 2018-10-01: Get Ready For Fun Times At Funan


CapitaLand Mall Trust - Get Ready For Fun Times At Funan

  • Funan to open ahead of schedule.
  • Encouraging pre-committed occupancy.
  • Likely equity fund raising for Westgate acquisition.

A modern mall for a cosmopolitan city

  • CapitaLand Mall Trust (CMT) held the topping out ceremony of Funan last Friday (28 Sep) which was officiated by Guest of Honour Mr Heng Swee Keat, Singapore’s Minister for Finance.
  • The process from Funan’s ground breaking to structural completion took ~19 months (overall construction 72% completed), and the retail and office components are now expected to open in 2Q19. This comes in earlier than the previous announced opening target of 3Q19.
  • Besides a faster-than-expected opening schedule, Funan is also poised to be a modern and innovative mall, aiming to be Singapore’s first online-and-offline (O&O) shopping mall which integrates online, offline, data and logistics to enhance consumers’ experience via an omni-channel strategy. Interesting features include utilising facial recognition for its smart interactive directory to provide shoppers with customised recommendations and video analytics to analyse footfall and crowd density.

~ ~ Where SG investors share

Encouraging leasing momentum

  • According to CapitaLand Mall Trust (CMT), including leases signed and in advanced negotiations, the take-up rates for Funan’s retail and office components have hit 70% and 60%, respectively. Some of these tenants include Golden Village Cineplex, Kopitiam Foodcourt, ABC Cooking Studio and Ark Futsal.
  • As for the serviced residence component lyf Funan Singapore (previously divested by CMT to The Ascott Limited), the opening is expected in 4Q19, ahead of earlier expectations for a 2020 opening.

Less excited on proposed Westgate acquisition (remaining 70% stake)

  • To recap, another recent significant event for CapitaLand Mall Trust (CMT) was its proposed acquisition of the balance 70% of the units in Infinity Mall Trust which holds Westgate. Although Westgate is strategically located in the Jurong Lake District, the acquisition NPI yield of 4.3% (based on FY17 figure) appears tight, in our view.
  • The total acquisition cost is estimated to be ~S$805.5m, of which the expected cash outlay component is ~S$405.6m. We expect this to be funded by both debt and equity. Hence the overhang over a likely equity fund raising exercise may subsequently neutralise the initial positive buzz created by Funan.
  • Our fair value remains at S$2.10.

Wong Teck Ching Andy CFA OCBC Investment Research | 2018-10-01
SGX Stock Analyst Report HOLD Maintain HOLD 2.100 Same 2.100