CapitaLand Mall Trust - OCBC Investment 2018-10-26: Placement Fund Westgate Acquisition

CAPITALAND MALL TRUST (SGX:C38U)

CapitaLand Mall Trust - Placement Fund Westgate Acquisition

CapitaLand Mall Trust’s (CMT) 3Q18 results met our expectations. Gross revenue and NPI rose 0.7% and 1.1% y-o-y to S$170.5m and S$122.7m, respectively. This was led by higher gross revenue from a number of its malls including Junction 8, Bedok Mall and Tampines Mall, but partially offset by the divestment of Sembawang Shopping Centre and lower occupancy and rental rates at JCube and Bukit Panjang Plaza.

DPU increased 5.0% y-o-y to 2.92 S cents, as management had released S$4.0m of its taxable income available for distribution to unitholders which was previously retained (3Q17: nil). Excluding this, we estimate that CMT’s adjusted DPU growth would have been more stable at +1.0% y-o-y to 2.81 S cents.
For 9M18, CapitaLand Mall Trust’s NPI improved 2.8% to S$369.1m, forming 76.8% of our full-year forecast. DPU of 8.51 S cents represented growth of 3.0% and this constituted 75.5% of our FY18 forecast.

Operationally, we note that rental reversions for CapitaLand Mall Trust came in +0.6% for 9M18 (1H18: +0.8%), which implies that 3Q18 had softer rental uplifts. This was larger due to Plaza Singapura (9M18: +1.7% versus 1H18: +4.0%) and Raffles City (9M18: -2.1% versus 1H18: -0.8%).
Occupancy was firm, increasing 0.5 ppt q-o-q to 98.5%. There was also better momentum on shopper traffic and tenants’ sales psf. While the former was down 1.8% for 9M18, it was a pick up as compared to 1H18’s 2.4% decline.
Tenants’ sales psf rose 0.5% for 9M18, reversing from the -0.2% registered in 1H18.

Having obtained unitholders’ approval on 25 Oct for the proposed acquisition of the balance 70.0% of the units in Infinity Mall Trust which holds Westgate, CapitaLand Mall Trust subsequently launched a private placement exercise to raise gross proceeds of S$277.6m. 134.1m new units will be issued at a price of S$2.07, which comes in at the mid-point of its initial guidance of S$2.049-S$2.097. We expect Westgate to continue ramping up from here.
After fine-tuning our assumptions from these developments, we raise our FY18 and FY19 DPU forecasts by 0.1% and 1.0%, respectively. Our fair value estimate correspondingly inches up from S$2.10 to S$2.12.

Wong Teck Ching Andy CFA OCBC Investment Research | https://www.iocbc.com/ 2018-10-26

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