2Q13 DPU at 2.53 cts/unit. CMT delivered another quarter of DPU growth as Distributable Income (DI) grew by 10% YoY to SGD87.7m, mainly on the back of completed AEIs at JCube, Bugis Atrium@Orchard. Healthy tenant sales growth is expected to underpin positive rental reversion and Westgate is expected to open by Christmas this year, adding another income stream. Maintain BUY, TP adjusted to SGD2.15 on the back of higher cost o 8.3% (from 7.5%).

Underlying income in line with expectations SGD87.7m excluded SGD5.7m of taxable income that had been retained for subsequent distribution in the FY. For 1H13, retained taxable income of SGD12.3m is added to the the results were in line with expectations estimate and on track for an FY13 DPU of 10.6 cts/unit.

Malls continue to trade well. In 1H13, CMT’s malls enjoyed a 4.8% YoY growth in shopper traffic while tenants’ sales improved by 3.3% YoY. This allowed CMT to enjoy positive rental reversion of 6.4% and portfolio occupancy also improved to 99.1% from 98.3% in 1Q13.

Acquisitions unlikely in 2H13. CMT’s gearing is at a comfor 35%. Management stated that it is still open to acquisitions either from third parties or from its sponsor CMA, but we think any acquisition from its sponsor is unlikely to happen in 2H13. This is because CMA’s most stabilized asset, ION Orchard, remains a major contributor to recurrent income while the other properties (The Star Vista, Bedok Mall and 50% stake in Westgate) are either not stabilized or still under construction.

No new AEIs announced. CMT is embarking on a SGD35m AEI at Bugis Junction, which is expected to be fully Management revealed that it is still evaluating its plans for Funan in discussions with the authorities over the additional GFA of 315,561 sq ft which is currently approved for office use. We believe the preference would be to change it to retail use, either in whole or in part. In our view, the eventual materialization of Funan’s AEI plans will be a positive catalyst for the stock. Maintain BUY.

Source: Maybank Kim Eng Research - 22 Jul 2013