CapitaLand Mall Trust - CGS-CIMB Research 2020-07-22: A “Not Too Bad” Quarter


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

EING Kar Mei CFA CGS-CIMB Research | LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2020-07-22
SGX Stock Analyst Report ADD MAINTAIN ADD 2.26 UP 2.240