CapitaLand Mall Trust - Maybank Kim Eng 2020-09-06: Merger Moves Ahead

CAPITALAND MALL TRUST (SGX:C38U)

CapitaLand Mall Trust - Merger Moves Ahead

CapitaLand Mall Trust (SGX:C38U) is proceeding with its planned merger with CapitaLand Commercial Trust (SGX:C61U) and its EGM is now fixed for 29 Sep 2020.
A higher DPU accretion for both unitholders, due to waiver of CapitaLand Mall Trust’s acquisition fee, has sweetened the deal.
Scale benefits from the merger are unchanged, while a more diversified AUM and higher development headroom adds growth options, to support its portfolio remodelling over the medium term.

Sector fundamentals are improving, and valuations remain undemanding at 6.3% FY21 dividend yield and 0.96x PB, with catalyst from better-than-expected tenant sales post-lockdown.
Maintain BUY on CapitaLand Mall Trust and DDM-based Target Price of SGD2.35 (COE: 6.3%, LTG: 1.5%).

CapitaLand Mall Trust together with CapitaLand Commercial Trust have issued notices to their unitholders for an EGM to be held on 29 Sep 2020 to vote for their proposed merger as was first announced in Jan this year. The transaction sees CapitaLand Mall Trust acquire all CapitaLand Commercial Trust units via a trust scheme of arrangement, with 88% to be financed by new units at a 0.72x exchange ratio and 12% in cash at SGD.259 per CapitaLand Commercial Trust unit.
CapitaLand Mall Trust’s waiver of its SGD111.2m acquisition fee raises DPU accretion for its unitholders to +4.1% (from +1.6%) and to CapitaLand Commercial Trust at +7.6% (previously +6.5%). The long-stop date has been extended from 30 Sep to 30 Nov 2020, with CapitaLand Commercial Trust to be delisted on 3 Nov 2020 if the deal succeeds.

The deal rationale remains unchanged; the exercise aims to create the largest S-REIT and second-largest commercial APAC REIT with a SGD12.7b market cap, ahead of Ascendas REIT (SGX:A17U) at SGD11.5b, and backed by a SGD22.4b AUM (96% in Singapore, 4% in Frankfurt, Germany).
Management expects the new CapitaLand Integrated Commercial Trust to embark on more sizeable mixed-used acquisitions/ redevelopments in Singapore and other developed markets, given its higher SGD5.8b development headroom.

The recovery in shopper traffic since the start of Singapore’s Phase 2 reopening is gaining traction, especially for its larger malls where traffic has reached 73-82% of pre-COVID levels, and should improve with further relaxation measures. We expect its suburban malls to be more resilient in terms of both occupancy and rents with recovery at its downtownn assets still challenged by the absence of international tourists.
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.
See also CapitaLand Commercial Trust Share Price; CapitaLand Commercial Trust Target Price; CapitaLand Commercial Trust Analyst Reports; CapitaLand Commercial Trust Dividend History; CapitaLand Commercial Trust Announcements; CapitaLand Commercial Trust Latest News.

Chua Su Tye Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2020-09-06

SGX Stock Analyst Report BUY MAINTAIN BUY 2.350 SAME 2.350