CAPITALAND MALL TRUST (SGX:C38U)
CapitaLand Mall Trust - Welcoming The Merged Entity
- CapitaLand Mall Trust's 9MFY20 DPU of 6.06 Scts was below expectations at 67% of our full-year forecast due to higher-than-expected expenses incurred.
- Tenant sales are improving but we see near-term rental pressure.
- Reiterate ADD. Looking towards to the merged CapitaLand Mall Trust- CapitaLand Commercial Trust entity, CapitaLand Integrated Commercial Trust (CICT).
Returning more of its retained income
- CapitaLand Mall Trust (SGX:C38U)’s 9M20 DPU of 6.06 Scts (-31.6% y-o-y) was below expectations at 67% our full-year forecast as we had underestimated its operating expenses.
- In 3Q20, CapitaLand Mall Trust released a further S$36.4m of its income retained from 1Q20. CapitaLand Mall Trust has returned the bulk of its retained income. It held only S$10m at end-Sep vs. S$69.6m at end-Mar.
- 9M20 revenue fell 19.7% y-o-y to S$468.7m, while NPI declined 23.2% y-o-y S320.8m, mainly due to rental waivers of S$106m granted to tenants. The lower revenue was partially offset by the commencement of its operations in Funan in Jun 2019.
Improving tenant sales; tenant retention is key
- YTD rental reversion declined 4.4% in 9M20 (3Q20: -15% to -20%) vs. +0.1% in 1H20. Raffles City Raffles City reported the largest drop in rental reversion in 9M20 at -15.9% from the renewal of c.11% of the mall’s NLA. IMM, Plaza Sing and Clarke Quay chalked up positive rental reversions.
- CapitaLand Mall Trust's occupancy remained high at 97.7% in 3Q20, albeit down 0.3% pt q-o-q. 9M20 shopper traffic recovered to c.60% of 9M19's level while tenant sales recovered to c.85%. Suburban malls saw a stronger recovery in tenant sales -- 3Q20 tenant sales recovered to just 3-5% shy of 3Q19's level vs. downtown malls' -20% y-o-y.
Repositioning malls and weaker rental reversion in the near term
- CapitaLand Mall Trust aims to reposition Clarke Quay and Raffles City while rethinking the trade mix of its Funan mall. As downtown malls, these malls are more vulnerable to the absence of tourists and weak office crowds. CapitaLand Mall Trust’s strategy continues to be striking a balance between mall occupancy and rental rate.
- We expect some rental support in the future in view of weak trading environment but that will be on a targeted basis. Leases accounting for 29% of its gross rental income would expire in 2021. We see near-term rental pressure, especially for its downtown malls, as long as tourist arrivals continue to be weak. Occupancy cost remains at 18-20% in 3Q20.
Reiterate ADD on CapitaLand Mall Trust
- We cut CapitaLand Mall Trust's FY20-22F DPU by 5-10%, factoring in weaker rental rate and higher operating expenses, including expenses incurred for its merger with CapitaLand Commercial Trust. Our DDM-based Target Price declines accordingly. We keep our ADD call as we think its share price has priced in the near-term volatility.
- We look forward to the merged CapitaLand Mall Trust - CapitaLand Commercial Trust entity (effective 21 Oct) which will commence trading as CapitaLand Integrated Commercial Trust (CICT) on 28 Oct. We believe benefits of the merger would be felt in the longer run when CapitaLand Integrated Commercial Trust (CICT) delivers on accelerated growth prospects.
- 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 smaller/larger-than-expected COVID-19 impact.
EING Kar Mei CFA
CGS-CIMB Research
|
LOCK Mun Yee
CGS-CIMB Research
|
https://www.cgs-cimb.com
2020-10-22
SGX Stock
Analyst Report
2.13
DOWN
2.260
