Steady as she goes. CapitaMall Trust (CMT) posted a 5% YoY growth in its 3Q12 distributable income to SGD80.9m, which was within expectations. 3Q12 DPU was up by 2% QoQ to 2.42 cents, taking YTD DPU to 7.10 cents. Properties that have undergone (or are undergoing) asset enhancement will be contributing more meaningfully in FY13, in which we expect DPU to grow by 14.4% YoY. Maintain BUY.

Shrugging off dip in shopper traffic. For 9M12, CMT's malls experienced a slight 2.2% YoY decline in shopper traffic, but tenant sales remained resilient, inching up by 1.2% YoY in the same period. YTD rental reversion was up 6.1%, with another 5.2% of the portfolio NLA to be renewed in 4Q12. CMT's portfolio occupancy rate remained at a very healthy 98.4%.

Facelifted properties enjoying strong footfalls. Management updated that JCube has been attracting an average of 1.3m visitors a month since opening in April. Similarly, an average of 1.4m visitors per month have been visiting Bugis+, since the Asset Enhancement Initiative (AEI) was completed in end-July. The Atrium@Orchard is on track to open in early November with the completion of its AEI, and the property is already more than 90% committed.

Repositioning of IMM. In line with the "3-in-1 mall" concept at Jurong Gateway, CMT is in the midst of repositioning IMM as a value mall. 30 outlet brands will be occupying ~10% of IMM's retail NLA and are expected to be operational by the end of the year. This will complement JCube's entertainment-focused concept and Westgate's family and lifestyle focus.

Undemanding valuations for a market leader. CMT has a history of resilient DPUs and a strong track record of successful AEIs. With an FY13F DPU yield of 5.1%, we think valuations are undemanding for this market leader. Maintain BUY, with a higher DDM-derived target price of SGD2.35.

Source: Maybank Kim Eng Research - 22 Oct 2012