Opening two more malls before Christmas. CapitaMalls Asia (CMA) reported in line 3Q13 core PATMI of SGD65.1m (+4% YoY; +22% QoQ), taking 9M13 core PATMI to SGD185.3m, or 75% of our full-year estimate. CMA is on track to open Bedok Mall and Westgate (both in Singapore) before Christmas this year, which will bring greater cheer as they underpin earnings growth for FY14. CMA remains our preferred pick amongst Singapore developers, and we have raised our TP to SGD2.56, pegged to a 10%-discount to RNAV.

Malls operating at healthy metrics. YTD, CMA’s existing malls in Singapore enjoyed same-mall NPI growth of 3.8% on the back of tenants’ sales growth of 3.2% psm. Overall, its malls in China are operating at a very healthy average occupancy rate of 97.2%, with YTD tenants’ sales growing at 9.8% psm YoY. We believe these healthy metrics validate CMA’s mall positioning as well as its lease management abilities.

Set to entrench its leadership position. In Singapore, CMA is on track to open Bedok Mall and Westgate in 4Q13 before Christmas, having already achieved commitment rates of ~100% and ~85% respectively. CapitaMall Jinniu (Phase II) in Chengdu, China, opened on 29 Sep with >90% occupancy and CMA expected the mall to achieve an NPI yield of ~7% after its first year of operation.

Ample financial strength for more acquisitions. CMA’s cash position now stands at SGD1.2b, which will comfortably cover outstanding commitments of about SGD930m. We estimate that CMA still has headroom for ~SGD500m worth of acquisition before its net gearing reaches 0.5x, which is still healthy, in our view. One acquisition possibility is Project Jewel, the iconic development at Changi Airport, which we believe CMA may possibly be offered an equity stake.

Our preferred pick amongst Singapore developers. We reiterate CMA as our top pick, with a TP of SGD2.56, pegged to a 10% discount to RNAV. We believe CMA continues to be an attractive proxy to consumerism in the region.  

Source: Maybank Kim Eng Research - 31 Oct 2013