CapitaLand Mall Trust - DBS Research 2020-04-02: Riding The Headwinds Together


CapitaLand Mall Trust - Riding The Headwinds Together

  • New proposed bill to protect tenants against potential rent payment defaults has further elevated earnings and cashflow risks for landlords, especially retail REITs.
  • Dividend reduction by one of its peers may result in a near-term knee-jerk reaction on share price.
  • CapitaLand Mall Trust's share price have priced in some of these negatives after a 34% decline from its peak in Jan20 and now trades at 0.8x P/NAV, below -1.5SD.
  • Downgrade to HOLD; Target Price lowered to S$1.75.

Preserving the ecosystem

Tenant rebates to tide tenants through end of May

  • CapitaLand Mall Trust (SGX:C38U) is committed to preserve the ecosystems within CapitaLand Mall Trust’s malls during the COVID-19 outbreak. First wave of tenant rebates included a half month rental rebate for a select group of tenants and S$10m in marketing assistance to all tenants.
  • To relief potential cash flow burden, security deposits held by CapitaLand Mall Trust was used to offset against rents for the month of March.
  • In the light of the recent suspensions legally enforced on certain trade sectors (Entertainment & Education tenants), and the general worsening of the COVID-19 outbreak within Singapore, CapitaLand Mall Trust will be extending rental rebates from half a month to 2 months (over April and May).
  • This will be partially offset by property tax relief for the entire year provided by the government in the supplementary budget, which will neutralise approximately 1 month’s worth of rental rebates.

Low tourist traffic impacting central malls and IMM

  • Central malls - Bugis Junction, Clarke Quay, Raffles City - and outlet mall IMM are traditionally malls that have a higher percentage of tourist traffic and will be hit more compared to heartland malls.
  • Clarke Quay also stands as one of the main tourist attractions along the Singapore River, and is home to a number of clubs and bars which are under suspension until the end of April.
  • As companies in the central region implement business continuity plans, the working crowd within the central business district of Singapore is generally much thinner than usual, hurting food & beverage and services tenants within central malls.
  • Fairmont Singapore (part of the Raffles City integrated development) is one of the hotels shortlisted by the government to temporarily house Singaporeans returning from abroad as they serve their ‘Stay Home Notice’. The hotel will see visibly higher occupancy for at least the next 3 months.

Operational update:

Read also

Derek TAN DBS Group Research | Rachel TAN DBS Research | Singapore Research Team DBS Research | https://www.dbsvickers.com/ 2020-04-02
SGX Stock Analyst Report HOLD MAINTAIN BUY 1.750 DOWN 2.95