CFA Society Singapore
SINGAPORE (Oct 29): Maybank KimEng and OCBC Investment Research are maintaining their “hold” calls on Capitaland Mall Trust (CMT) after the latter's 3Q18 results came in line with expectations.
Gross revenue and NPI rose 0.7% and 1.1% y-o-y to $170.5 million and $122.7 million, respectively. This was led by higher gross revenue from a number of its malls including Junction 8, Bedok Mall and Tampines Mall.
However, the topline was partially offset by the divestment of Sembawang Shopping Centre and lower occupancy and rental rates at JCube and Bukit Panjang Plaza.
DPU increased 5.0% y-o-y to 2.92 cents, as management had released $4 million of its taxable income available for distribution to unitholders which was previously retained.
However, Maybank and OCBC say CMT’s rental reversions remained weak.
Operationally, OCBC notes that rental reversions for CMT came in +0.6% for 9M18 against +0.8% for 1H18, implying “3Q18 had softer rental uplifts,” says analyst Andy Wong, attributing it largely to Plaza Singapura and Raffles City.
Maybank analyst Chua Su Tye says shopper traffic declined 1.8% y-o-y even as tenant sales rose 0.5% y-o-y. While reversions across its portfolio were mostly positive, its weaker assets – JCube and Bt Panjang Plaza saw occupancies slip to 94.3% from 95.3%, and -1.1% reversion, given keen competition in the respective sub-markets. Occupancy stayed firm, rising 0.5 ppt q-o-q to 98.5%.
In addition, having obtained unitholders’ approval on Oct 25 for the proposed acquisition of the balance 70% of the units in Infinity Mall Trust which holds Westgate, CMT subsequently launched a private placement exercise to raise gross proceeds of $277.6 million.
“We expect Westgate to continue ramping up from here. After fine-tuning our assumptions from these developments, we raise our FY18 and FY19 DPU forecasts by 0.1% and 1.0%, respectively. Our fair value estimate correspondingly inches up from $2.10 to $2.12,” says OCBC’s Wong.
After the completion of the acquisition on Nov 1, Maybank’s Chua says CMT's concentration from its three malls in the west of Singapore (Westgate, JCube, and IMM) rises from 12% to 18% of AUM.
Assuming the deal is fully-debt funded at interest rate of 3.25-3.5%, Chua says FY19 DPU could rise by up to 1.5% while gearing increases from 31.5% to 36%.
Meanwhile, Funan is set to open in 2Q19, with pre-committed occupancies based on leases signed and in advanced negotiations at 70% and 60% for its retail and office components.
“We expect revenue contribution from 2H19. Other DPU drivers include AEI works at Westgate and Tampines Mall which are on track to complete in 4Q18,” says Chua,
Maybank and OCBC have price targets of $2.15 and $2.12 respectively.
As at 10.53am, units in CMT are trading at $2.13, giving it a FY18E yield of 5.4% based on Maybank’s estimates.