FY12  DPU  in  line  with  expectations.  CapitaMall  Trust  (CMT)  reported  FY12  DPU  of 9.46S¢  (+1.0%  YoY),  inline  with  our  FY12  DPU  estimate  with  a  deviation  of  +0.2%. Revenue for this period grew to S$661.6m (+4.9% YoY) while net property income rose to S$445.3m (+6.5% YoY) mainly due to an increase in contribution from JCube, Bugis+ and positive  rental  reversion  from  both  new  and  renewal  of  leases.  Going  forward,  we  expect CMT  to  continue  to  register  strong  numbers  on  the  back  of  1) contributions  from  JCube, Bugis+  and  Orchard  Atrium  which  were  opened  in  April,  August  and  October  2012 respectively;  2)  additional  income  contribution  from  Westgate  which  is  expected  to  be completed in December 2013 and 3) the repositioning of IMM as a value-focused mall with about 30 outlet brands. Although we like CMT for its bright prospect, defensive play (76% CMT's  revenue  contributed  from  suburban  malls)  and  a  better  than  expected  pre-commitment  rate  in  its Westgate property  (c.50%), given  its  current  valuation, trading  at a P/B  of  1.3x  and  a  dividend  yield  of  4.3%  we  believe  this  counter  is  fairly  valued  as  we downgraded  our  call  on  CMT  to  NEUTRAL  with  an  unchanged  DDM  based  (COE:  7.2%, terminal growth: 2.0%) TP of S$2.27.
 
New  contribution  from  Bugis+,  JCube  and  Orchard  Atrium.  At  the  end  of  December, approximately  99.5%,  99.6%  and  95.3%  of  NLA  for  JCube,  Bugis+  and  Orchard  Atrium respectively  have  been  committed.  Due  to  the  excellent  locations  coupled  with  diversified tenants, Since the re-opening of Orhard Atrium in 4Q12, this mall recorded on average of 1.2m  footfall  on  a  monthly  basis.  As  Orchard  Atrium  continues  to  gain  popularity  coupled with  higher  occupancy  in  the  coming  months,  we  expect  CMT  to  continue  to  benefit  from this AEI going forward.
 
Westgate  on-track  for  completion  in  4Q13.  Westgate  a  JV  project  being  the  first greenfield  development  project  of  CMT  is  currently  on-track  for  completion  in  4Q13.As revealed  previously  (November  2012),  about  half  the  retail  space  has  been  pre-leased  at an  average  rent  of  S$16-18  psf/month.  Concurrently,  IMM  is  undergoing  an  AEI  to reposition  it  as  a  value-focused  mall.  The  entire  exercise  will  be  completed  by  May  2013 with a total of 50 outlet brands being repositioned.
 
Counter  fairly  priced.  Although  the  outlook  of  CMT  continues  to  remain  strong  going forward,  we  believe  most  of  the  positive  news  have  been  factored  into  the  share  price, giving  this  counter  limited  room  for  upside  in  the  near  term.  In  addition,  with  the  counter trading  at  1.3x  P/B,  coupled  with  a  FY13  forecasted  dividend  yield  of  4.3%  ,  we  have downgraded our call on CMT to Neutral with an unchanged DDM based TP of S$2.27.

Currently  trading  at  3.2%  spread  to  10-year  bond  yield.  CMT  is  currently trading at 3.2% spread to 10-year bond  yield which is 32Bps above its pre-crisis mean  spread  (2.9%)  based  on  FY13  DPU.  Our  TP  of  S$2.270  translates  to  a spread of 3.0%.

Source: OSK