CapitaLand Mall Trust - CGS-CIMB Research 2020-05-01: Bracing For 2Q


CapitaLand Mall Trust - Bracing For 2Q

  • 1QFY20 DPU came in at 8.7% of our full-year forecast as CapitaLand Mall Trust retained ~70% of its income in 1QFY20.
  • Outlook remains fluid. Main focus is to help tenants tide through Covid-19.
  • Maintain ADD. CapitaLand Mall Trust has a strong balance sheet to weather this difficult period.

CMT's 1QFY20 revenue and NPI stronger y-o-y

  • CapitaLand Mall Trust (SGX:C38U)’s 1QFY20 revenue and NPI grew 6% and 5.9% y-o-y to S$204.3m and S$148.3m, respectively. The stronger revenue was mainly attributed to the opening of Funan in Jun 2019, partially offset by the amortisation of rental rebates granted to tenants affected by Covid-19.
  • Despite the stronger revenue and NPI, DPU declined 70.5% y-o-y to 0.85 Scts as CapitaLand Mall Trust retained S$69.6m of taxable income (~30% payout ratio) in 1QFY20. Hence, while revenue came in at 34% of our full-year forecast, DPU came in at 8.7% which we deem in line as we expect CapitaLand Mall Trust to pay out more towards the end of the year as the situation stabilises.
  • The retained income works out to about 1 month of its rental income.

Starting to feel the impact of Covid-19

  • CapitaLand Mall Trust reported rental reversion of +1.6% in 1QFY20 with a retention rate of 88% versus 83% last year. Management indicated that the positive rental reversion is not a good indication of rental reversion outlook in the immediate term given the weak retail environment.
  • The focus now is to maintain the occupancy of the malls by being flexible in lease structure. q-o-q occupancy declined slightly from 99.3% to 98.5% in 1QFY20.
  • While most malls saw some decline in occupancy q-o-q, Clake Quay saw the largest decline at 4.1% pts q-o-q. Clarke Quay remains a challenging asset due to Covid-19 given that it is largely an entertainment venue.
  • Shopper traffic declined 9.1% y-o-y while tenant sales dropped 7.5% y-o-y. All trade categories except supermarkets (+13.1% y-o-y) and books and stationery (flat y-o-y) reported weaker sales y-o-y. 12% of leases will be due this year.

Giving out 2 months of rental rebate for now

  • CapitaLand Mall Trust has allocated S$114m for a rental relief package for tenants. This includes
    1. 100% rental rebates in Apr and May 2020 for almost all retail tenants, inclusive of the value of the property tax rebates and
    2. additional rental waiver from 27-31 Mar for tenants ordered to close their premises since 27 Mar 2020. It has also given out 1 month’s deposit to offset rents in Mar 2020.
  • CapitaLand Mall Trust is committed to provide more assistance when needs arise. So far, only 1 tenant has requested for rental deferment as CapitaLand Mall Trust has been engaging with needy tenants for alternative payment plans. Management does not discount the possibility of a higher component of turnover rent in the future.

Reiterate ADD with an unchanged DDM-based Target Price of S$2.24

EING Kar Mei CFA CGS-CIMB Research | LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2020-05-01
SGX Stock Analyst Report ADD MAINTAIN ADD 2.240 SAME 2.240