• CapitaLand Mall Trust 1H19 DPU of 5.8 Scts in line with estimates, at 49.5% of our FY19 forecast.
• We expect better 2H as new contributions from Funan filters in gradually.
• Maintain HOLD with a DDM-based Target Price of S$2.60.

CMT's 1HFY19 Results in Line

• CAPITALAND MALL TRUST (SGX:C38U) reported a 10.3% y-o-y rise in 1H19 gross revenue to S$382.3m while net property income rose 10.9% y-o-y to S$273.3m mainly due to acquisition of the remaining 70% stake in Westgate in Nov 2018. Funan which reopened on 28 Jun 2019 also made a small contribution to the revenue growth.
• Excluding Westgate, Funan and divestment of Sembawang Shopping Centre in Jul 2018, revenue was still higher, driven by higher gross rental income as well as higher other income from Tampines Mall, Bedok Mall, Plaza Singapura, and Clarke Quay. This was partially offset by lower occupancy for JCube.
• CapitaLand Mall Trust's 1HFY19 DPU of 5.8 Scts (+3.8% y-o-y), came in line at 49.5% of our full-year forecast.

Positive Rental Reversion; Stable Occupancy

• Portfolio occupancy slipped slightly to 0.7% mix in Clark Quay.
• CapitaLand Mall Trust saw a 1.9% y-o-y increase in shopper traffic portfolio-wide whilst tenant sales psf slipped 0.9% y-o-y. Nonetheless, CapitaLand Mall Trust achieved a positive reversion of 1.8% for leases renewed in 1H19, at an 86.3% retention rate.
• The highest IMM Building, Lot One and Westgate, ranging Raffles City has seen higher traffic flow since the opening of Funan, especially on weekends.

Expect Steady Rental Income

• CapitaLand Mall Trust has a further 7% and 26.7% of gross rental income to be weak.
• Management indicated it would continue to adopt a proactive asset management strategy including potential asset enhancement of its older assets, as well as redevelopment and acquisition opportunities.

Maintain HOLD

• We maintain our HOLD call on CapitaLand Mall Trust with a DDM-based Target Price of S$2.60. CapitaLand Mall Trust’s 2H19F earnings growth is likely to be underpinned by gradual contributions from Funan. The lifestyle mall commenced operation on 28 Jun 19 and currently is 95-98% leased.
• Rerating catalyst include better-than expected performance from Funan and Westgate as well as the acquisition of Jewel Changi.
• Downside risks include slower-than-expected rental growth.

Source: CGS-CIMB Research - 23 Jul 2019