CAPITALAND MALL TRUST (SGX:C38U)
CapitaLand Mall Trust - Stick To Quality
- Capitaland Mall Trust's share price underperformed.
- Potential entry into new markets?
- FY20F distribution yield of 5.1% as at 14 Nov close.
See value at current price level
- Capitaland Mall Trust's share price has dipped 5.3% (from 21 Oct to 14 Nov), underperforming the FTSE ST REIT Index’s 3.4% decline, despite recently reporting a robust 4.8% y-o-y growth in its 3Q19 DPU. See Capitaland Mall Trust Announcements; SREITs share price performance.
- Besides the sector correction, we believe the underperformance may have been driven by concerns that CapitaLand Mall Trust (SGX:C38U) could potentially be penetrating into new overseas markets such as Australia and Europe.
- We opine that diversification into these markets make sense, given the limited acquisition opportunities in Singapore, coupled with the fact that interest rates have declined in Australia and Europe. Furthermore, we believe management would adopt the proper hedging strategies if it enters into a new market. Aggregate leverage of 34.4% (as at 30 Sep 2019) also leaves sufficient debt headroom for acquisitions.
Some softness in operating metrics but overall still resilient
- As a recap, CapitaLand Mall Trust’s overall portfolio occupancy improved 0.6 ppt q-o-q to 98.9%. Rental reversions came in at +1.2% for 9M19, which was a moderation from 1H19 (+1.8%).
- Shopper traffic growth also slowed (+1.3% y-o-y for 9M19 versus +1.9% for 1H19), while tenants’ sales slipped 1.3% y-o-y for 9M19 as compared to -0.9% for 1H19. Notwithstanding this, we believe CapitaLand Mall Trust’s overall performance can still be considered resilient.
Robust FY20F DPU growth of 7.1%
- Based on our forecasts, CapitaLand Mall Trust’s DPU growth in 2020 would be healthy at +7.1%, which is one of the strongest among our S-REITs coverage. This would largely be driven by a full-year contribution from Funan which has a committed occupancy of 98.7%.
- Our fair value estimate is unchanged at S$2.73. Based on CapitaLand Mall Trust’s closing price on 14 Nov, FY20F distribution yield is 5.1%. See Capitaland Mall Trust Share Price; Capitaland Mall Trust Target Price; Capitaland Mall Trust Dividend History.
OCBC Research Team
OCBC Investment Research
|
https://www.iocbc.com/
2019-11-15
SGX Stock
Analyst Report
2.730
SAME
2.730
