CAPITALAND MALL TRUST (SGX:C38U)
CapitaLand Mall Trust - A “Not Too Bad” Quarter
- CapitaLand Mall Trust’s 1HFY20 DPU of 2.96 Scts (-49% y-o-y) came in below expectations.
- 1HFY20 occupancy remained high while rental reversion was flat.
- More pressure on rents but we believe this has been priced in. Reiterate ADD.
CapitaLand Mall Trust's 1HFY20 DPU came in below expectations
- CapitaLand Mall Trust (SGX:C38U)’s 1HFY20 DPU of 2.96 Scts (-49% y-o-y) came in below expectations at 30% our FY20F full year forecast.
- In 1HFY20, the REIT saw some cost savings but we had overestimated the cost savings. However, CapitaLand Mall Trust surprisingly released S$23.2m of the income retained in 1QFY20. CapitaLand Mall Trust could be returning more of the retained income in 2H20F.
- CapitaLand Mall Trust's 1HFY20 revenue fell 16.7% to S$318.4m, while NPI declined 20.8% y-o-y S$216.4m, mainly due to rental waivers of S$76.5m granted to tenants. The lower revenue was partially offset by the commencement of Funan operations in Jun 2019 which contributed S$26.5m revenue in 1HFY20.
- CapitaLand Mall Trust’s total portfolio valuation declined c.2% y-o-y, with no change in cap rate.
Fulfilled the requirements of mandatory rental waiver for SMEs
- As at Jun 2019, CapitaLand Mall Trust had committed to extend tenant support of S$154.5 (equivalent to 2.6 months of CapitaLand Mall Trust’s monthly rental income). Hence, the REIT has fulfilled the mandated rental waiver for qualifying SMEs (60% of total tenants based on the REIT’s estimates).
- In addition to the government mandated support, CapitaLand Mall Trust also waived turnover rent and release the one-month security deposits to offset rents. The REIT is likely to give out more rental assistance going forward.
Footfall recovering; pressure on rents inevitable
- Portfolio rental reversion has been encouraging so far, with just a 0.1% decline in 1HFY20, although still a decline vs. +1.6% in 1QFY20. Occupancy remained high at 97.7%, down slightly from 99.3% in Dec 2019. Going forward, CapitaLand Mall Trust nonetheless sees pressure on rental reversion as it focuses on maintaining occupancy by being more flexible in leasing terms (e.g. short-term lease extensions, higher proportion of GTO).
- Footfall and tenant sales fell 40.6% and 15.4% y-o-y, respectively, but have seen steady recovery since Singapore entered into phase 2 of its safe reopening. Average shopping traffic has recovered to 53% y-o-y (19 Jun to 5 Jul 20), with suburban malls seeing a faster footfall recovery of 50-80% vs. downtown malls of 40-55% y-o-y.
Maintain ADD at a higher rolled-over FY21F DDM-based Target Price of S$2.26
- We reduce our FY20-22F DPU by 1-8% after factoring in lower interest income and higher operating expenses. We continue to like CapitaLand Mall Trust for its attractive valuation (trading at 0.93x P/BV below 12-year mean of 1.2x) and potential merger with CapitaLand Commercial Trust (SGX:C61U). CapitaLand Mall Trust and CapitaLand Commercial Trust announced that they are working towards convening EGMs before 30 Sep 2020, the long-stop date.
- See CapitaLand Mall Trust Share Price; CapitaLand Mall Trust Target Price; CapitaLand Mall Trust Analyst Reports; CapitaLand Mall Trust Dividend History; CapitaLand Mall Trust Announcements; CapitaLand Mall Trust Latest News.
- Upside/downside risks include faster recovery in footfall/ weaker-than-expected occupancy or rental reversion.
EING Kar Mei CFA
CGS-CIMB Research
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LOCK Mun Yee
CGS-CIMB Research
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https://www.cgs-cimb.com
2020-07-22
SGX Stock
Analyst Report
2.26
UP
2.240
