FY13 DPU growth on track. Following the opening of the Atrium in end-Oct 2012, CMT enjoyed the full-quarter contributions from those malls that had completed major AEIs in 1Q13. 1Q13 DPU of 2.46 cts/unit could have been higher if not for the SGD6.6m of taxable income retained for future distribution within FY13. While no major AEIs for Tampines Mall or Funan were announced, plans were revealed instead for enhancing Bugis Junction. We remain sanguine about CMT’s growth potential and reiterate our BUY recommendation.

Strong underlying performance. On the back of robust occupancy rates and more contributions from Atrium, Bugis+ and JCube, CMT’s underlying amount available for distribution grew by 12% QoQ and 14% YoY to SGD93.7m, which was in line with expectations. Of that, SGD6.6m will be retained for future distribution and another SGD1.8m in tax-exempt income will be retained for general corporate and working capital purposes. As a result, 1Q13 DPU was at 2.46 cts/unit.

Malls experienced a robust quarter. Operationally, CMT’s malls saw a 4.3% YoY increase in shopper traffic in 1Q13, which correspondingly led to a 2.4% YoY increase in tenant sales. The tenants’ healthy sales had allowed CMT to achieve positive rental reversion of 6.2% for the 170 new leases or renewals signed in 1Q13.

Bugis is next in line for minor makeover. Even though no blockbuster AEI plans were announced, CMT revealed that Bugis Junction will be next to undergo asset enhancement after ~70,000 sq ft of space will be recovered from anchor tenant department store operator BHG and converted to specialty shops. Expected to last about five quarters and cost SGD35m, the AEI is expected to lead to an incremental NPI growth of SGD3.1m. We have not ruled out future AEI plans involving Tampines Mall and/or Funan.

Resilience backed by growth. CMT has proven time and again that it has a resilient portfolio that offers steady growth via proactive lease management and innovative asset enhancements. Reiterate BUY with a higher DDM-derived target price of SGD2.45.

Source: Maybank Kim Eng Research - 22 Apr 2013