Earnings growth remains on track. CMA reported a 2Q13 core PATMI of SGD53.6m (-20% QoQ; +40% YoY), accounting for 21.6% of our full-year estimate and largely in line with expectations. More importantly, underlying net property income from its malls continues to improve steadily, underpinned by healthy tenants’ sales growth. Bedok Mall and Westgate are on track to open later this year, providing earnings growth for FY14. Reiterate BUY, TP adjusted to SGD2.51.

Malls showed improved operational metrics. For 1H13, CMA’s Singapore malls enjoyed YoY shopper traffic and tenants’ sales growth of 4.2% and 3.5% respectively. In China, there was also marked improvement as shopper traffic and tenants’ sales grew by 0.8% and 9.5% respectively, compared with -0.9% and 8.3% in 1Q13. The committed occupancy rates also edged up in Singapore (from 98.7% in 1Q13 to 99.2% in 1H13) and China (96.3% to 96.9%).

Pacing mall openings. In Singapore, Bedok Mall is expected to open in 4Q13 and is already >90% committed. Westgate is scheduled to open before Christmas and is >75% committed. In Chengdu, CMA will defer the opening of CapitaMall Tianfu by around three quarters as management feels that chain retailers should be given more time to pace their expansion with CMA, given that CapitaMall Jinniu (Phase 2) will already be opening in 3Q13.

Confident of Westgate. When asked how it feels about Westgate given the success of the recently opened JEM by competitor Lend Lease, management remains confident that Westgate will be different from JEM, and suggested that there could be more new-to-market brands. At >75% committed occupancy, management revealed that Westgate is on track to achieve average rents of SGD15-16 psf pm.

Still our top big-cap pick. We still like CMA’s retail mall business and we expect its China operations to continue to exhibit steady growth. Reiterate BUY, even as we adjust our TP to SGD2.51 on the back of lower fair values for its listed REITs.

Source: Maybank Kim Eng Research - 24 Jul 2013