CapitaLand Mall Trust - DBS Research 2019-10-22: Double Prosperity From Funan & Westgate


CapitaLand Mall Trust - Double Prosperity From Funan & Westgate

  • CAPITALAND MALL TRUST (SGX:C38U)'s 3Q19 DPU grew 4.8% y-o-y to 3.06 Scts; 9M19 DPU expanded 4.1% to 8.86 Scts, in line
  • 3Q19 revenue and NPI were both higher by c.18%.
  • Strong 3Q19 results led by
    1. maiden contribution from Funan;
    2. an additional 70% stake in Westgate.
  • 9M19 rental reversion +1.2% but 3Q19 was -0.7%; tenant sales +1.3%; shopper traffic -1.3%.

CMT delivered 3Q19 DPU of 3.06 Scts (+4.8% y-o-y).

  • CapitaLand Mall Trust's 9M19 DPU of 8.86 Scts (+4.1% y-o-y) was in line at 74.5% and 75.7% of consensus and our FY20F DPU estimates. See Capitaland Mall Trust Announcements; Capitaland Mall Trust Dividend History.
  • Revenues and NPI grew 17.9% y-o-y and 17.6% y-o-y to S$201m and S$144m respectively.
  • Distributable income was 9.1% y-o-y higher despite retaining a higher amount of capital distribution and tax-exempt income distribution from CapitaLand Retail China Trust (CRCT) and Westgate of S$12.9m vs S$2.6m in 3Q18.
  • The strong 3Q19 results were mainly supported by:
    1. maiden contribution from Funan which opened in end-June19,
    2. purchase of additional 70% stake in Westgate Mall in 4Q18, and
    3. operational improvement from higher occupancies (98.9% vs 98% in 3Q18) mainly from Clarke Quay (95.4% vs 90.4% in 3Q18).
  • While CapitaLand Mall Trust recorded positive rental reversions (excluding Funan and Sembawang Shopping Centre) of 1.2% in 9M19 vs 1.8% in 1H19 and 0.6% in 9M18, we estimate that 3Q19 delivered negative rental reversion of 0.7% mainly from Clarke Quay (-14.8%), Lot One (-12.1%), Bedok Mall (-3.3%) and Plaza Singapore (-1.8%).
  • Shopper traffic remained robust at +1.3% while tenant sales fell 1.3% in 9M19.
  • Sales per square foot for top 5 trade categories in 9M19 grew 1.2% y-o-y, similar to 1H19, which implies that performance will likely remain resilient as occupancy costs remain stable.

Gearing and cost of debt stable; FY19 refinancing completed

  • Gearing remained relatively flat at 34.4%.
  • Cost of debt was steady at 3.2%.
  • Debts expiring in FY19 were repaid in Oct19. Hence, FY19 refinancing has completed.

Key updates

  • The rejuvenation of Lot One Shoppers’ Mall is underway and visitors can look forward to a wider movie selection and a bigger public library.
    • The cinema is being upgraded by reformatting 4 big halls into 8 smaller halls, thus, expanding its movie offerings at any one time.
    • The public library will be expanded by 600sqm in terms of NLA, featuring new initiatives to innovate learning experiences in L4 and L5.

Maintain BUY; Target Price of S$2.95

  • We maintain our BUY rating with Target Price of S$2.95.
  • (See Capitaland Mall Trust Share Price; Capitaland Mall Trust Target Price.)
  • We remain bullish on CapitaLand Mall Trust as we believe Westgate and Funan will continue to drive growth in FY19F / FY20F (evident in 3Q19), by c.3% CAGR (2-Yr), one of the faster growing large-cap S-REITs.
  • The continued efforts to rejuvenate its malls and optimise its tenant mix will continue to drive operational improvements.

Rachel TAN DBS Group Research | Derek TAN DBS Research | 2019-10-22
SGX Stock Analyst Report BUY MAINTAIN BUY 2.950 SAME 2.950