CapitaLand Mall Trust - Phillip Securities 2019-01-24: Still-weak Reversions Despite Underlying Recovery In Tenant Sales

CAPITALAND MALL TRUST (SGX:C38U) | SGinvestors.io CAPITALAND MALL TRUST (SGX:C38U)

CapitaLand Mall Trust - Still-weak Reversions Despite Underlying Recovery In Tenant Sales

  • CAPITALAND MALL TRUST (SGX:C38U)'s  FY18 NPI and DPU in line with our forecast. Higher revenue in 4Q18 4Q18 from remaining 70% stake of Westgate acquired on 1 Nov 2018.
  • Slight recovery in tenant sales, with recovery in key trade categories.
  • Stable portfolio occupancy amidst AEI works at Westgate and Tampines Mall.
  • Still-weak rental reversions. Higher gearing and shorter term to maturity now with debt consolidated from Infinity Mall Trust (which holds Westgate).
  • Maintain NEUTRAL with unchanged Target Price of S$2.09.



The Positives


Slight recovery in tenant sales.

  • Tenant sales ticked up slightly by +0.5% y-o-y in FY18 (no change y-o-y in FY17), with recovery in more trade categories this year (just four categories with negative sales growth in FY18 versus eight categories in FY17).
  • Categories that turned around to clock in positive tenant sales growth in FY18 include Food & Beverage, Fashion, and Beauty & Health – the top three trade categories by gross rental income (GRI).

Stable portfolio occupancy amidst AEI works at Westgate and Tampines Mall.

  • Occupancy was maintained at 99.2%, with > 99% occupancy achieved at its top four malls (by GRI) – Plaza Singapura, IMM, Bugis Junction, Tampines Mall, in spite of the AEI works that were done at Tampines Mall and Westgate.
  • Tenant retention rate was also stable at 82.3% (FY17: 79.3%).


The Negatives


Still-weak rental reversions.

  • On a portfolio basis, rental reversions barely moved a percentage point in FY18, despite the underlying recovery in tenant sales growth.

Deteriorating balance sheet metrics.

  • Consolidation of debt from Infinity Mall Trust (which holds Westgate) has now resulted in a shorter term to maturity of 4.4 years (3Q18: 5.2 years) and a higher leverage of 34.2% (3Q18: 31.7%).
  • In addition, Westgate has now been pledged as collateral – all other assets are still unencumbered.


Outlook

  • AEIs at Tampines Mall (completed Oct 2018) and Westgate (completed Dec 2018) could bring in higher footfall and tenant sales – and this is starting to be evident in the turnaround in rental reversions recorded in FY18 (positive rental reversions for both malls compared to negative reversions in FY17).
  • Another near-term growth catalyst would be the upcoming completion of Funan which is slated to open in June 2019. As at end-December, 80% of leases at Funan have been pre-committed or are under active negotiations.


Maintain NEUTRAL with unchanged Target Price of S$2.09.

  • This translates to a FY19e yield of 5.6% and P/NAV of 1.06x.





Tara WONG Phillip Securities Research | https://www.stocksbnb.com/ 2019-01-24
SGX Stock Analyst Report NEUTRAL MAINTAIN NEUTRAL 2.090 SAME 2.090



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