• 1Q14 DPU up 4.5% YoY
• 6.2% rental reversions achieved
• Continued focus on AEIs

1Q14 results within view

CapitaMall Trust (CMT) reported its 1Q14 results yesterday. NPI grew by 5.3% YoY to S$114.3m, while amount available for distribution to unitholders rose 9.3% to S$102.4m. We note that S$8.0m cash has been retained for distribution in FY14, and S$5.3m income from CapitaRetail China Trust for working capital purposes. As a result, DPU for the quarter came in at 2.57 S cents, 4.5% higher than that achieved in 1Q13. This met 23.4% of both ours and consensus fullyear DPU projections.

Healthy operating metrics

The better performance was driven mainly by higher occupancy at Plaza Singapura and Atrium@Orchard, and completion of Phase 1 asset enhancement initiative (AEI) at IMM Building. There was some softness in the portfolio shopper traffic and psf tenant sales, which saw a decline of 1.9% and 4.0% YoY respectively over the quarter. However, leasing activity remained sanguine, with 172 leases or 427,276 sqft NLA renewed at rents 6.2% higher than previously contracted rates. For the rest of 2014, 12.8% of CMT’s gross rental income is due for renewal. Portfolio occupancy as at 31 Mar improved 0.3% QoQ to 98.8%, boosted by Westgate mall which registered 92.0% occupancy versus 85.8% when it commenced operations in Dec 2013 (S$3.3m NPI contribution in 1Q14). Given that Westgate Wonderland has recently opened and Kids Club is targeted to open in 2Q, we believe performance at Westgate is set to improve further.

Maintain BUY

Looking ahead, CMT will continue to focus on executing its AEIs at Bugis Junction and Tampines Mall. In addition, it will also embark on Phase 2 AEI at IMM Building and reconfigure Level 2 of JCube to increase the retail offerings and enhance the shoppers’ experience. We are making minor adjustments to our forecasts except incorporating the FRS111 Joint Arrangements accounting principle into our model. Maintain BUY with unchanged S$2.20 fair value on CMT.

Source: OCBC Research - 24 Apr 2014