CapitaLand Mall Trust - RHB Invest 2020-10-26: Navigating Rough Seas


CapitaLand Mall Trust - Navigating Rough Seas

  • CapitaLand Mall Trust’s 3Q numbers were broadly in line. Tenant sales have shown good recovery since opening up of economy in June but the recovery has been uneven across various tenant sectors and malls suggesting pain points ahead.
  • Management’s focus is on maintaining occupancy in malls while rents are expected to remain under pressures.
  • Valuations are not compelling in our view, with stock trading at 1x P/BV and a 5% FY20F yield.

CapitaLand Mall Trust's 3Q DPU up 1% y-o-y

  • 3Q DPU up 1% y-o-y as CapitaLand Mall Trust distributed S$36.4m of the S$46.4m retained in 1H20. In 3Q, revenue was lower 25% y-o-y mainly due to rental waivers of S$29.5m, as well as lower gross turnover and other income.
  • Year-to-date, CapitaLand Mall Trust offered S$183.4m rental relief packages, including property tax rebates and government cash grants. With the bulk of rent rebates already provided for, CapitaLand Mall Trust has now crossed its earning trough, barring a resurgence in COVID-19 cases in Singapore.

Rents to remain under pressure with occupancy being the key focus.

  • Year-to-date (Sep) rent reversions for CapitaLand Mall Trust’s mall portfolio stood at -4.4% vs those in 1H20 of +0.1%, indicating a sharp 22% lower rents for leases signed in 3Q20. Key malls which saw significant rent declines include Raffles City Singapore, Bugis Junction, Tampines mall, Lot One Shoppers mall and Bugis+.
  • Management noted that the impact of COVID-19 has been more severe on downtown malls as compared to suburban malls, due to a lack of tourists and work from home trends.
  • Overall, occupancy remains stable at 98% (1H20: 97.7%). While shoppers traffic (see Figure 6) is still down (-40% y-o-y), tenant sales rebounded (-14% y-o-y). Looking ahead, we expect rent reversions to be in the -5% to -15% range as maintaining a high occupancy is expected to be the key focus.

More assets revamp/redevelopments on the cards.

  • With rapidly changing retail landscape on the back of COVID-19, management noted that it would undertake a comprehensive review of each asset in order to better reposition its tenant mix. In particular Clark Quay (which has a high proportion of night life activities) is expected to see a significant revamp in the near-term. Other malls, which are also expected to undergo significant repositioning in our view, include Funan, Raffles City and Bugis+.
  • We also expect CapitaLand Mall Trust to redevelop some of its older malls into potentially mixed developments in medium-term, post its successful merger with CapitaLand Commercial Trust.

Successful merger with CapitaLand Commercial Trust.

Vijay Natarajan RHB Securities Research | 2020-10-26
SGX Stock Analyst Report NEUTRAL MAINTAIN NEUTRAL 2.030 SAME 2.030