CapitaLand Mall Trust (CMT) announced this morning that it has entered into an agreement to sell its Sembawang Shopping Centre (SSC) for S$248.0m to a JV between Lian Beng Group and Apricot Capital Pte Ltd. This represents a significant premium at almost twice the valuation of the property (S$126.0m), as at 31 Dec 2017.

The divestment is expected to generate net proceeds amounting to S$245.6m and CMT would be able to register a net gain of ~S$119.6m upon completion, which is expected on or about 18 Jun this year.

We are positive on this transaction given the solid divestment quantum, while there would be minimal impact to CMT’s financials, as the mall accounts for ~1% of its total asset value.

Although historically the gross revenue of SSC is not disclosed (FY17 contribution classified together with JCube under ‘Other Assets’), we estimate that it constituted 2% of CMT’s FY17 gross revenue.

We expect management to use the net proceeds to pare down some borrowings and to partially fund its Funan redevelopment capex.

As CMT will be releasing its 1Q18 results tomorrow after market close, we keep our BUY rating and S$2.26 fair value for now.

Source: OCBC Research - 19 Apr 2018