CapitaLand Mall Trust announced their 2Q15 results this morning. We attended the analyst briefing and below are the key takeaways.

Analyst Briefing Key Takeaways

Actively repositioning JCube in a competitive environment in Jurong East. JCube’s occupancy stands at 82.3% as at 30 June 15. This is down from 96% in Dec 2014 (below full occupancy due to certain AEI works) and ~100% at year ends 2012 and 2013. Management acknowledges the tough retail environment in the area currently, due to new competing malls in recent years such as Jem, Westgate and Big Box. Management is actively repositioning JCube to bring in complementary sets of tenants which can cater to the young crowd in JCube. This demographic makes up a large part of shoppers in JCube, drawn by the ice skating rink and the cinema.

Management remains optimistic on long term prospects of Jurong East malls, notwithstanding near term supply pressure. In May this year, Jurong East was announced as the site where the terminus of the Kuala Lumpur-Singapore High Speed Rail will be located. The Jurong Lake District is also envisioned to become the next commercial hub in Singapore as the government seeks to ease congestion and infrastructure constraints in the city area. Notwithstanding near -term supply pressure, management is confident of the long term prospects for its Jurong East malls.

Rental reversions to continue to be under pressure going forward. Management continues to see rental reversions come under pressure going forward. Rental reversions have averaged between 6-6.5% from 2010 to 2014. In 1H15, rental reversion stands at 4.6%.

Various options for Funan DigitaLife Mall are being considered. The managers are exploring various options to unlock the value of Funan, including a re-development or sale of the shopping mall.

Uplift of shopper traffic supported by Tampines Mall, Plaza Singapura and Westgate. CMT’s 1H2015 shopper traffic increased 3.4% y-y, where “necessity malls” were identified to have driven the increase in shopper traffic.

Investment Actions

No stock rating or target price provided. We do not have any coverage on CMT at the moment.

Source: Phillip Securities Research - 23 Jul 2015