• Funan to open ahead of schedule
• Encouraging pre-committed occupancy
• Likely equity fund raising for Westgate acq.

A Modern Mall for a Cosmopolitan City

CapitaLand Mall Trust (CMT) held the topping out ceremony of Funan last Friday (28 Sep) which was officiated by Guest of Honour Mr Heng Swee Keat, Singapore’s Minister for Finance. The process from Funan’s ground breaking to structural completion took ~19 months (overall construction 72% completed), and the retail and office components are now expected to open in 2Q19. This comes in earlier than the previous announced opening target of 3Q19.

Besides a faster-than-expected opening schedule, Funan is also poised to be a modern and innovative mall, aiming to be Singapore’s first online-and-offline (O&O) shopping mall which integrates online, offline, data and logistics to enhance consumers’ experience via an omni-channel strategy.

Interesting features include utilising facial recognition for its smart interactive directory to provide shoppers with customised recommendations and video analytics to analyse footfall and crowd density.

Encouraging Leasing Momentum

According to CMT, including leases signed and in advanced negotiations, the take-up rates for Funan’s retail and office components have hit 70% and 60%, respectively. Some of these tenants include Golden Village Cineplex, Kopitiam Foodcourt, ABC Cooking Studio and Ark Futsal.

As for the serviced residence component lyf Funan Singapore (previously divested by CMT to The Ascott Limited), the opening is expected in 4Q19, ahead of earlier expectations for a 2020 opening.

Less Excited on Proposed Westgate Acquisition (remaining 70% Stake)

To recap, another recent significant event for CMT was its proposed acquisition of the balance 70% of the units in Infinity Mall Trust which holds Westgate. Although Westgate is strategically located in the Jurong Lake District, the acquisition NPI yield of 4.3% (based on FY17 figure) appears tight, in our view.

The total acquisition cost is estimated to be ~S$805.5m, of which the expected cash outlay component is ~S$405.6m. We expect this to be funded by both debt and equity. Hence the overhang over a likely equity fund raising exercise may subsequently neutralise the initial positive buzz created by Funan. Our fair value remains at S$2.10.

Source: OCBC Research - 1 Oct 2018