CapitaLand Mall Trust - Phillip Securities 2019-04-25: Anticipating The Anticipated

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CAPITALAND MALL TRUST (SGX:C38U)

CapitaLand Mall Trust - Anticipating The Anticipated

• CAPITALAND MALL TRUST (SGX:C38U)'s 1Q19 NPI and DPU in line with our forecast.
• Stable portfolio occupancy and higher tenant retention rate.
• Funan pre-leased at 90% occupancy – on track to open in 2H2019.
• Still-weak rental reversions, dragged down by a wider mix of trade categories. Tenant sales also slid 0.5% y-o-y.
• Maintain NEUTRAL with higher Target Price of S$2.21 (prev S$2.09).

The Positives

Stable portfolio occupancy and higher tenant retention rate.

• Stable occupancy across the portfolio. Full occupancy was maintained at Tampines Mall despite the opening of Jewel in April 2019. Tenant retention was also higher at 88.9% (1Q18/4Q18: 82.3%/82.9%).

Funan pre-leased at 90% occupancy.

• Notwithstanding an initial fitting-out period of 3-6 months, Funan is expected to contribute to CapitaLand Mall Trust from 2H19 onwards. The retail and office components of Funan are currently 90% leased (4Q18: 80%). Media reports revealed that various government bodies have leased office space at Funan.
• The Ascott Ltd’s lyf-branded serviced residence at Funan is also expected to commence operations in 2020.

The Negatives

 Still-weak rental reversions.

• Despite an improvement from the average 0.8% rental reversion achieved in FY18, the 1.2% reversion in 1Q19 is lagging behind that of its peers such as STARHILL GLOBAL REIT (SGX:P40U) and FRASERS CENTREPOINT TRUST (SGX:J69U). Tenant sales also slid 0.5% y-o-y in 1Q19, dragged down by a wider mix of trade categories than in 1Q18.

Outlook

• IMM (second biggest contributor by GRI) had its lease renewed for another 30 years on 23 Jan 2019 (initial 30+30 year lease from 23 Jan 1989). With the Jurong Lake District shaping up under the URA’s Draft Master Plan 2019, we not only expect reversions at this asset (as well as Westgate) to trend up going forward but for a progressive valuation uptick.
• The re-commencement of operations at Funan is expected to progressively improve portfolio operational metrics.

Maintain NEUTRAL with higher Target Price of S$2.21 (prev S$2.09).

• We adjust our target price to reflect a lower cost of equity.
• Our target price translates to a 5.4% distribution yield and a P/NAV of 1.06x.

Tara WONG Phillip Securities Research | https://www.stocksbnb.com/ 2019-04-25

SGX Stock Analyst Report NEUTRAL MAINTAIN NEUTRAL 2.21 UP 2.090