• CAPITALAND MALL TRUST (SGX:C38U)'s 3Q19 DPU grew 4.8% y-o-y to 3.06 Scts; 9M19 DPU expanded 4.1% to 8.86 Scts, in line
• 3Q19 revenue and NPI were both higher by 18%.
• Strong 3Q19 results led by
  1. maiden contribution from Funan;
  2. an additional 70% stake in Westgate.
• 9M19 rental reversion +1.2% but 3Q19 was -0.7%; tenant sales +1.3%; shopper traffic -1.3%.

CMT Delivered 3Q19 DPU of 3.06 Scts (+4.8% Y-o-y)

• CapitaLand Mall Trust's 9M19 DPU of 8.86 Scts (+4.1% y-o-y) was in line at 74.5% and 75.7% of consensus and our FY20F DPU estimates. See Capitaland Mall Trust Announcements; Capitaland Mall Trust Dividend History.
• Revenues and NPI grew 17.9% y-o-y and 17.6% y-o-y to S$201m and S$144m respectively.
• Distributable income was 9.1% y-o-y higher despite retaining a higher amount of capital distribution and tax-exempt income distribution from CapitaLand Retail China Trust (CRCT) and Westgate of S$12.9m vs S$2.6m in 3Q18.
• The strong 3Q19 results were mainly supported by:
  1. maiden contribution from Funan which opened in end-June19,
  2. purchase of additional 70% stake in Westgate Mall in 4Q18, and
  3. operational improvement from higher occupancies (98.9% vs 98% in 3Q18) mainly from Clarke Quay (95.4% vs 90.4% in 3Q18).
• While CapitaLand Mall Trust recorded positive rental reversions (excluding Funan and Sembawang Shopping Centre) of 1.2% in 9M19 vs 1.8% in 1H19 and 0.6% in 9M18, we estimate that 3Q19 delivered negative rental reversion of 0.7% mainly from Clarke Quay (-14.8%), Lot One (-12.1%), Bedok Mall (-3.3%) and Plaza Singapore (-1.8%).
• Shopper traffic remained robust at +1.3% while tenant sales fell 1.3% in 9M19.
• Sales per square foot for top 5 trade categories in 9M19 grew 1.2% y-o-y, similar to 1H19, which implies that performance will likely remain resilient as occupancy costs remain stable.

Gearing and Cost of Debt Stable; FY19 Refinancing Completed

• Gearing remained relatively flat at 34.4%.
• Cost of debt was steady at 3.2%.
• Debts expiring in FY19 were repaid in Oct19. Hence, FY19 refinancing has completed.

Key Updates

• The rejuvenation of Lot One Shoppers’ Mall is underway and visitors can look forward to a wider movie selection and a bigger public library.
  • The cinema is being upgraded by reformatting 4 big halls into 8 smaller halls, thus, expanding its movie offerings at any one time.
  • The public library will be expanded by 600sqm in terms of NLA, featuring new initiatives to innovate learning experiences in L4 and L5.

Maintain BUY; Target Price of S$2.95

• We maintain our BUY rating with Target Price of S$2.95.
• (See Capitaland Mall Trust Share Price; Capitaland Mall Trust Target Price.)
• We remain bullish on CapitaLand Mall Trust as we believe Westgate and Funan will continue to drive growth in FY19F / FY20F (evident in 3Q19), by 3% CAGR (2-Yr), one of the faster growing large-cap S-REITs.
• The continued efforts to rejuvenate its malls and optimise its tenant mix will continue to drive operational improvements.

Source: DBS Research - 22 Oct 2019