Simons Trading Research
CapitaLand Mall Trust - Leading the Pack
- CapitaLand Mall Trust's 3Q18 DPU of 2.92 Scts (in line).
- Strong operational performance paints a positive picture for the retail sector.
- Full speed ahead in 2019 as CMT rides on twin growth engines to accelerate DPU growth momentum.
- Maintain BUY; S$2.45 Target Price.
What’s New
3Q18 DPU of 2.92 Scts
- CapitaLand Mall Trust (CMT) delivered a solid 3Q18, backed by strong operating performance. 3Q18 DPU of 2.92 Scts (+3.9% q-o-q, +5% y-o-y).
- For 9M18, DPU of 8.51 Scts (+3% y-o-y) formed 75% of our full-year forecasts and was in line.
- The growth in distributions was mainly driven by organic improvements - which were captured at both the top-line and NPI levels, as well as lower borrowing costs.
- 3Q18 NPI rose 1.1% y-o-y to S$122.7m on the back of a 0.7% increase in gross revenues.
Gearing inches higher, but maintains balanced debt profile
- Excluding NAV slightly to S$21.99 in the previous cushion the impact of an uptick result, gearing rose 31.5% (2Q) to 7% (3Q).
- Average debt held firm at 35.2 years.
Continual operating improvements offer glimpse into recovering retail outlook
- Broad-based NPI uplift across CMT’s mall portfolio more than offset the income vacuum left by the sale of Sembawang Shopping Centre in June 2018.
- NPI growth for the respective malls ranged between 0.6% and 10.3% y-o-y, offsetting the 4.9% y-o-y decline at The Atrium @ Orchard.
- Major malls such as Bedok Mall, Junction 8, IMM Building, Plaza Singapura and Tampines Mall registered strong NPI growth of 10.3%, 9.8%, 6.1%, 2.5% and 2% respectively, anchoring the strong operating performance this quarter.
- Portfolio occupancy was lifted slightly to 98.5% from 98% in the previous quarter.
- Portfolio rental reversions fared similarly to previous quarters, +0.6% in 3Q18, a sign that pressures in the retail space are bottoming out. The reversal of tenant sales trends back into positive territory for 9M18 further affirms this.
- While rental reversions at selected assets remained negative on the back of tactical tenant remixing strategies, the continued moderation in negative reversions at Westgate (-0.5% for 9M18 vs -3.3% in 1Q18) further affirms our view that CMT’s proposed acquisition of Westgate has come at an opportune time.
Twin engines propelling DPU growth
- Looking ahead into Westgate of Funan would help the coming years.
Source: DBS Research - 25 Oct 2018
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