• 1Q15 DPU rose 4.3% YoY
• 6.1% rental reversions attained in 1Q15
• No changes to forecasts, FV and rating

1Q15 results within our expectations

CapitaMall Trust (CMT) reported its 1Q15 results which met our expectations. Gross revenue inched up 1.6% YoY to S$167.4m, while DPU grew at a stronger pace of 4.3% to 2.68 S cents. This constituted 24.5% and 24.1% of our FY15 projections, respectively. About S$8m, or 0.23 S cents of CMT’s taxable income available for distribution to unitholders, was retained for future distributions in FY15 (likely to be in 2H15). If we include this amount, CMT’s DPU would have formed 26.2% of our FY15 projection.

Operational trends showcase resiliency

During the quarter, CMT managed to obtain positive rental reversions of 6.1%, similar to the whole of FY14. Besides JCube (-11%) and Raffles City Singapore (-0.7%), all other malls delivered higher rental uplifts as compared to the preceding rental rates. Another encouraging sign came from the increase in both shopper traffic and tenants’ sales psf of 4.7% and 2.5% YoY, respectively. This was the second consecutive quarter of YoY growth achieved by CMT’s malls despite headwinds facing the retail sector in Singapore. As at 31 Mar 2015, CMT’s portfolio occupancy stood at 97.2%, slightly lower than the 98.8% clocked in as at end-2014, which we believe was partly due to AEI works at Bukit Panjang Plaza and Clarke Quay.

Retain our HOLD rating

In terms of financial position and capital management, CMT’s aggregate leverage ratio remains healthy at 33.8%, while ~98.3% of its total debt are on a fixed rate basis or have been hedged. Given this set of in-line results, we are keeping our forecasts intact. We are reiterating our HOLD rating and DDM-derived S$2.21 fair value estimate on CMT. The stock is currently trading at FY15F P/B ratio of 1.23x and distribution yield of 5.0%, which do not appear compelling, in our view. The former is approximately half a standard deviation above its 5-year forward mean, while the latter is one standard deviation below its 5-year forward average.

Source: OCBC Research - 22 Apr 2015