SINGAPORE (Nov 29): Maybank Kim Eng is maintaining “hold” on CapitaLand Mall Trust (CMT) with a higher price target of $2.20 compared to $2.15 previously, after raising distribution per unit (DPU) estimates by 1-7% to factor in the trust’s recently-completed acquisition of a remaining 70% interest in Westgate mall.

The research house continues to remain cautious on the REIT in view of soft retail sales, rising online penetration and declining tourist spending on shopping.

In a Wednesday report, analyst Chua Su Tye notes how CMT has lagged behind its peers in growth metrics, although its unit price has held up well against the market in spite of the underlying sector weakness.

Nonetheless, he believes government decentralization policies should support demand for CMT’s suburban properties in the longer-term, while the trust’s balance sheet remains strong with a healthy gearing of 31.7%.

Due to soft macros and weak growth prospects, Chua says retail remains his least-preferred Singapore REIT (S-REIT) subsectors.

Frasers Centrepoint Trust (FCT) is his preferred S-REIT for retail exposure for its strengthening suburban mall footprint and potential acquisition catalysts. The REIT has been given a “buy” rating with a target price of $2.55.

“We expect large destination malls to perform better, as evident from the stronger shopper traffic and tenant sales profiles at MCT’s VivoCity and FCT’s portfolio in 3QCY18. We further expect expansion by F&B and sports brands to support demand and maintain our rental-growth estimates of 0-2% for 2019-20E,” says Chua.

As at 11.56am, units in CMT and FCT are trading at $2.26 and $2.19, respectively, or 1.1 times and 1.05 times book value.