CapitaLand Mall Trust (CMT) reported its 1Q19 results which met our expectations. Gross revenue rose 10.0% YoY to S$192.7m, while NPI jumped 11.5% to S$140.1m. The latter formed 25.1% of our FY19 forecast.

Growth was driven by the acquisition of the balance 70% interest in Westgate on 1 Nov 2018, coupled with stronger organic growth from most of its malls. DPU increased 3.6% YoY to 2.88 S cents, and this excludes S$9.2m of taxable income available for distribution to unitholders (~0.249 S cents per unit) which was retained. This portion retained will be distributed out in subsequent quarters. 1Q19 DPU accounted for 24.2% of our FY19 forecast.

Operationally, CMT achieved positive rental reversions of 1.2%, with only Bugis Junction recording negative rental reversions (-3.1%). Portfolio occupancy came down slightly by 0.4 ppt to 98.8% due largely to IMM Building, Bugis Junction and Clarke Quay. Shopper traffic rose 2.0% YoY in 1Q19, but tenants’ sales psf per month declined marginally by 0.4% YoY on a comparable malls basis.

On a positive note, Funan has already achieved high precommitment levels of 90%, and is on track to open in the middle of 2019. We maintain our HOLD rating and S$2.25 fair value estimate on CMT.

Source: OCBC Research - 24 Apr 2019