Acquisition in line with strategy. CMA is acquiring its first mall in Guangzhou. The partially-completed mall is valued at CNY2.2b, and CMA targets to open in phases beginning Dec 2014. The vendor is Greenland Real Estate. We see this as an attractive acquisition and in line with CMA’s strategy to build scale in regions it is already present in. Reiterate BUY. Our SGD2.56 TP is pegged to a 10% discount to RNAV.

A strategically-located project. The property is located in the redevelopment area of what used to be the former Guangzhou Baiyun International Airport. Situated in the heart of the commercial centre, the property is also directly linked to Baiyun Park subway station, currently serving the subway Line 2. By 2020, the station also serves a new Line 12. The population catchment comprises ~1.1m residents within a 3km-radius, as well as office workers in the vicinity.

Price appears fairly attractive. The property is an eight-storey mall which is part of an integrated development comprising a strata-titled office and retail elements. With a GFA of 86,000 sqm, the mall is valued at CNY25,581 psm on a bare-shell basis. Including fit-out, CMA estimates the total investment cost at CNY2.65b (CNY30,767 psm GFA). We think this is a fairly reasonable price given that Greenland sold the strata-titled mall at an average of CNY35,000 psm GFA some two years ago. CMA will also not have to bear development risks.

Mall to open as early as end-2014. As the mall is already under construction by the vendor, CMA estimates that it will be able to open half of the mall by Dec 2014 and the rest by mid-2015. As a mid-to-high end lifestyle mall, the property will present differentiated retail offerings from its older competitors nearby, namely G5 Mall (converted from the old airport passenger terminal) and Baiyun Wanda Plaza.

Establishing presence in the South. The acquisition would allow CMA to build scale in South China, where it will now have eight malls and three of them are within an hour’s drive from the latest acquisition. This is in line with CMA’s strategy to focus on key clusters, which will also include Beijing, Shanghai, Chengdu, Chongqing and Wuhan

Source: Maybank Kim Eng Research - 21 Nov 2013