• 4Q15 DPU rose 0.7% YoY
• Rental reversions softened further
• Operationally resilient

4Q15 results in-line with expectations

CapitaLand Mall Trust (CMT) reported its 4Q15 results which met our expectations. Gross revenue grew 9.2% YoY to S$180.4m. This was driven largely by the initial S$14.3m contribution from Bedok Mall, which was acquired on 1 Oct 2015. Excluding this, gross revenue inched up 0.6% YoY. The main drag came from a dip in gross revenue from JCube as a result of lower occupancy. DPU for 4Q15 inched up 0.7% YoY to 2.88 S cents. For FY15, CMT’s gross revenue rose 1.5% to S$669.0m, while DPU was up 3.8% to 11.25 S cents. These constituted 101.7% and 101.5% of our full-year projections, respectively.

Some positive trends, but rental reversions moderated further

Operationally, CMT’s portfolio exhibited some positive trends, such as the 4.9% and 5.3% increase in shopper traffic and tenants’ sales psf per month in FY15, respectively. Occupancy went up from 96.8% (as at end 3Q15) to 97.6%, as improvement was seen at IMM Building (completion of Phase Two AEI), Bukit Panjang Plaza and JCube. There was also encouraging developments at Clarke Quay, whereby the space previously vacated by LifeBrandz at Block C has now been 94% committed.

Notwithstanding this, the leasing climate remains challenging, as rental reversions for FY15 came in at 3.7%, signifying a continued moderation (9M15: 4.1%). Management expects further downward pressure on rents, but remains optimistic of achieving positive rental reversions for FY16, although negative reversions may be recorded for some leases.

CMT will continue to adjust its tenancy mix and bring fresh retail concepts to its consumers. With regards to its redevelopment plans for Funan DigitaLife Mall, management shared that it is looking at both a retail and office component, but details would only be available in due course.

Maintain BUY

We fine-tune our assumptions and also roll forward our valuations, resulting in a slight increase in our fair value estimate from S$2.09 to S$2.10. Reiterate BUY on CMT, as we believe the group will remain resilient amid the vagaries of the macroeconomic environment, given its focus on necessity spending and strong management team.

Source: OCBC Research - 25 Jan 2016