REIT - CGS-CIMB Research 2018-10-09: Minimal Impact From Newstead Liquidation

Newstead Technologies Liquidation - Minimal Impact To S-REIT - CGS-CIMB Research | SGinvestors.io CAPITALAND MALL TRUST SGX:C38U FRASERS CENTREPOINT TRUST SGX:J69U SUNTEC REAL ESTATE INV TRUST SGX:T82U

REIT - Minimal Impact From Newstead Liquidation

  • Media reported that Newstead, which has stores with Capitaland Mall Trust, Frasers Centre Point and Suntec City, is in liquidation.
  • Minimal impact on the REITs due to the small floor space occupied by Newstead.
  • We maintain Overweight on the REIT sector with retail as our least preferred sub-sector due to the challenging retail outlook.



Media reported Newstead in liquidation

  • Media reported that home-grown electronics retailer Newstead Technologies is currently in liquidation.
  • Newstead was established in 1998 and owns brands such as Digital Style, Nubox and @notebook.com. It has outlets at Nex, Sim Lim Square, Suntec City, Marina Square, Bedok Mall, City Square Mall, Raffles City, Causeway Point, Jem, Tampines Mall, Waterway Point and Jurong Point.
  • Newstead’s shops in Suntec City, Marina Square and one of the shops in Sim Lim Square have been labelled as closed on the company’s website.
  • The affected REITs under our coverage are Capitaland Mall Trust (owns Tampines Mall, Raffles City (40% owned), Bedok Mall and Funan), Frasers Centrepoint Trust (owns Causeway Point) and Suntec REIT (owns Suntec Mall).



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Minimal impact on Capitaland Mall Trust (CMT)

  • Newstead, under nubox brand occupied about 1k sf of floor space each in Raffles City (0.2% of total retail NLA), Tampines Mall (0.3% of total NLA) and Bedok Mall (0.4% of total NLA). As for Funan, Newstead has reserved 15,000 sf of space in the building which represents 4.5% of the total retail net lettable area (NLA).
  • Due to the small floor space occupied in the existing malls, we believe DPU impact will be minimal. Although Newstead has taken up 4.5% of the total Funan retail space, Funan has yet to open and is receiving favourable lease queries. Hence, we believe Capitaland Mall Trust will be able to find a replacement if Newstead pulls out.


Minimal impact on Frasers Centrepoint Trust (FCT)

  • The impact on Frasers Centrepoint Trust is minimal as Newstead’s Nubox only occupies 1,900 sf of the total NLA of Causeway Point (0.5% of Causeway Point’s NLA).
  • Furthermore, Nubox is located at level 1 which makes it easier to find a replacement.


Minimal impact on Suntec REIT

  • The retailer occupies c.0.4% of Suntec Mall’s NLA.
  • Well-located at level 1 in the North Wing, we believe it would not be an issue to fill the vacated space in the future.


Net negative impact on REITs but minimal

  • In conclusion, the liquidation of Newstead could have a net negative impact on landlords; however, the impact on overall REITs’ earnings should not be substantial.
  • REITs usually hold 2-3 months’ rent as security deposit from tenants which can be used as a buffer, as the REITs or Newstead look for new tenants.


Highlighted Companies


Capitaland Mall Trust

  • Rating: HOLD, Target Price: S$2.21
  • Newstead’s stores occupied ~0.2-0.4% of the affected mall’s retail NLA. Hence, minimal impact on DPU. Newstead reserved 4.5% of the total retail NLA of Funan which will only open in 2Q2019.

Frasers Centrepoint Trust

  • Rating: ADD, Target Price: S$2.49 
  • Newstead’s stores occupied ~0.5% of Causeway Point’s total retail NLA. Hence, minimal impact on DPU.

Suntec REIT

  • Rating: ADD, Target Price: S$2.08 
  • Newstead’s stores occupied ~0.4% of Suntec Mall’s total NLA. Hence minimal impact on DPU.
  • Malls affected by the liquidation of Newstead



Malls affected by the liquidation of Newstead

Mall affected Brand operating Store level % of retail space occupied Owned by Status
Bedok Mall nubox Level 1 ~0.4 Capitaland Mall Trust Open
Raffles City (40% owned) nubox Level 3 ~0.2 Capitaland Mall Trust Open
Tampines Mall nubox Level 1 ~0.3 Capitaland Mall Trust Open
Causeway Point nubox Level 1 ~0.5 Frasers Centrepoint Trust Open
Suntec City Newstead Technologies Level 1 ~0.4 Suntec REIT Closed
CGS-CIMB RESEARCH, COMPANY REPORTS





EING Kar Mei CFA CGS-CIMB Research | LOCK Mun Yee CGS-CIMB Research | https://research.itradecimb.com/ 2018-10-09
SGX Stock Analyst Report HOLD Maintain HOLD 2.210 Same 2.210
ADD Maintain ADD 2.490 Same 2.490
ADD Maintain ADD 2.080 Same 2.080



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