CapitaLand Mall Trust - CGS-CIMB Research 2019-01-23: A Solid 2018


CapitaLand Mall Trust - A Solid 2018

  • CapitaLand Mall Trust's full-year DPU of 11.5 Scts (+3% y-o-y) beat our and Bloomberg consensus forecasts due to one-off capital distribution from Westgate.
  • Achieved positive rental reversion (+0.7%) and higher occupancy.
  • Maintain HOLD. Strong DPU growth in FY19-20F priced in.

FY18 DPU beat forecasts

  • CAPITALAND MALL TRUST (SGX:C38U)’s full-year FY18 DPU of 11.50 Scts (+3.0% y-o-y) was above our (103% of forecast) and Bloomberg consensus expectations (102%) due to one-off capital distribution of S$11.1m from Westgate.
  • CapitaLand Mall Trust's FY18 revenue grew 2.2%, driven by the acquisition of Westgate (transaction completed in 1 Nov 2018) as well as better performance from Plaza Singapura, IMM, Tampines Mall, Junction 8 and Bedok Mall which offset the decrease in revenue from Sembawang Shopping Centre (divested in Jun 2018) and lower occupancy at JCube and Bukit Panjang Plaza.
  • Higher revenue coupled with the lower utility cost translated to stronger earnings.

Positive rental reversion

  • CapitaLand Mall Trust reported a full-year rental reversion of 0.7%, up from 0.6% in 9M18, due to the renewal of 23.1% of portfolio NLA in FY18. While Bedok Mall continued to report negative rental reversion, Westgate’s rental reversion turned positive in 4Q18, delivering +0.6% in FY18 vs. -0.5% in 9M18.
  • In fact, Westgate performed better than expected and achieved strongest sales growth within CapitaLand Mall Trust's portfolio in FY18. Management attributed this to asset enhancement initiatives (AEIs) and active tenants management which helped to improve the mall’s condition and traffic.

Occupancy rate improved to 99.2%

  • CapitaLand Mall Trust's occupancy improved from 98.5% in 9M18 to 99.2% in FY18. Clarke Quay's occupancy, which was affected by the closure of nightclub Shanghai Dolly in Apr 2018, recovered from 92.9% in 3Q to 98.3% in 4Q while Westgate’s continued to rise from 98.6% to 99.4%. Funan, which is on track to open by 2Q19, has achieved > 80% committed leases (including those in advanced negotiations) for both office and retail components.
  • Meanwhile, overall shopper traffic declined 0.9% in FY18 while tenant sales psf/month rose 0.5%. Stronger traffic at suburban malls and steady demand for necessity items drove both overall traffic and tenant sales, indicating that consumers remained cautious on spending.
  • Malls that may be up for redevelopment/AEI in the near future are JCube and Lot One.

Maintain HOLD

  • Our FY19 DPU dip 0.3% as we update our model following the FY18 results. Our DDM-based Target Price remains unchanged. We keep our HOLD call as we think the market has priced in CapitaLand Mall Trust's potential strong growth in FY19-20F.
  • Upside risks to our call are better-than-expected performance from Funan and Westgate.
  • Downside risks include slower-than-expected rental growth.

EING Kar Mei CFA CGS-CIMB Research | LOCK Mun Yee CGS-CIMB Research | 2019-01-23
SGX Stock Analyst Report HOLD MAINTAIN HOLD 2.290 SAME 2.290