Jurong’s big enough for all. With the recent grand opening of Lend Lease’s JemTM mall in Jurong Gateway, we visited CMT’s JCube and IMM over the weekend to see how they are faring in the face of new competition. We came away encouraged that footfalls at CMT’s malls remain healthy, and we believe that the population catchment in Jurong is large enough to sustain yet another mall in the neighbourhood in the form of CMT’s upcoming Westgate Mall. Reiterate BUY, Street-high target price maintained at SGD2.45.

Mild impact on IMM and JCube. Lend Lease’s JemTM opened on 15 Jun with much fanfare. We saw throngs of shoppers during our visit over the past weekend. On the same day at IMM, we noted that shopper traffic remained healthy. Despite its ample parking space of 1,290 lots, it still took us ~20 mins to enter the garage and find a parking space. IMM’s recent adjustment of tenant mix to include more factory outlets appears to be paying off as it offers something different from the run-of-the-mill malls. Over at JCube, its main crowd-puller – the Olympic-sized ice-skating rink, remained a popular attraction.

Westgate Mall unlikely to be one mall too many. Westgate Mall is already >60% pre-committed ahead of its completion at the end of this year, adding another 420,000 sq ft of retail NLA to meet the demands of the region’s population catchment of ~1m people. In addition, visitors to the upcoming 700-bed Ng Teng Fong Hospital and the office workers at the office towers of Westgate and JemTM will provide additional shopper traffic for the four malls. As the Jurong Lake District grows in importance as a regional commercial hub, we are confident the four malls can co-exist symbiotically to serve the large population. We expect CMT’s three malls in Jurong to contribute to ~19% of the portfolio’s NPI on a stabilized basis.

Limited impact from potentially higher rates. We reviewed the potential impact of borrowing costs on CMT’s DPU and found the impact to be minimal. 93% of CMT’s borrowings are on fixed rates with a fairly long average term to maturity of four years. Hence, our sensitivity analysis shows that for every 50 bps increase in the SIBOR, CMT’s FY14F DPU will only be impacted marginally by -0.3%.

Source: Maybank Kim Eng Research - 26 Jun 2013