CapitaLand Mall Trust - Maybank Kim Eng 2019-07-23: As Good As It Gets?

CAPITALAND MALL TRUST (SGX:C38U)

CapitaLand Mall Trust - As Good As It Gets?

CAPITALAND MALL TRUST (SGX:C38U) reported in-line (MKE & consensus) 2Q19 DPU of SGD2.92cts, +3.9% y-o-y with the contribution from its Westgate deal and Funan’s reopening.
Looking ahead however, we expect to see a drag on tenant sales across its larger AUM given the weak retail sales outlook.
We think that CapitaLand Mall Trust’s valuations will likely be supported by its scale and trading liquidity within the S-REITs space. But with the lack of near-term growth catalysts and no clear acquisition strategy, we stay at HOLD.

Our forecasts are unchanged, but we raised our DDM-based Target Price to SGD2.60 (COE: 6.1%, LTG: 1.5%) as we lower our risk-free rate assumption to 2.5%.

CapitaLand Mall Trust's 2Q19 revenue rose 10.6% y-o-y while NPI was up 10.3% y-o-y, driven by a 100% contribution from Westgate; its remaining 70% interest was acquired in 4Q18.
Portfolio occupancy dipped slightly q-o-q from 98.8% to 98.3%, due to IMM (down from 97.9% to 96.1%), Clarke Quay (96.9% to 94.0%) and Bedok Mall (99.6% to 98.9%).
Rental reversion improved to +1.8% for 1H19, from +1.2% in 1Q19 with stronger results at IMM (+4.2%), Lot One (+5.6%) and Westgate (+4.3%).
While shopper traffic improved at 1.9% y-o-y (vs +2.0% y-o-y in 1Q19), tenant sales were down 0.9% y-o-y (was - 0.4% y-o-y in 1Q19), in line with the weak retail sector outlook, which we expect to persist in the medium term. Tenant sales growth was led by its sporting goods (+8.5% y-o-y), jewellery and watches (+3.8%), and F&B (+3.5%) segments, which offset weaker home furnishings (-22.4%), IT & telecommunications (-12.9%), and electrical & electronics (-9.8%).

CapitaLand Mall Trust's AUM valuation rose 496.1% blended occupancy. The AUM uplift was likely due to improving NPI, as cap rates were unchanged at 4.40-7.00% across its portfolio.
Meanwhile CapitaLand Mall Trust will embark on a SGD15- 20m AEI at Lot One from the library the cinema.

CapitaLand Mall Trust's balance 15-year average and suggests SGD1.8-2.8b local and overseas management, while Jewel is a view.

Chua Su Tye Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2019-07-23

SGX Stock Analyst Report HOLD MAINTAIN HOLD 2.60 UP 2.400