CapitaMall Trust: Earnings Remain Strong
(BUY, SGD2.00, TP: SGD2.21)
CapitalMall Trust (CT) reported a DPU of 2.53 cents (+6.1% y-o-y) for 2Q13, in line with our forecast with a deviation of 1.2% (7.8% if the retained amount of SGD5.7m was included). Revenue for the period grew 10.4% y-o-y to SGD182.7m, while NPI climbed 12.2% y-o-y to SGD125.6m. Given its strong earnings and recent share price correction, we upgrade CT to a BUY, with a higher TP of SGD2.21.
Strong quarter on higher rent and AEIs. CT reported strong 2Q13 results, mainly attributed to higher rental rates achieved from the portfolio’s new and renewed leases, and contributions from the well-executed asset enhancement initiatives (AEIs) at JCube, Bugis Junction and The Atrium@Orchard. As of 30 June 2013, the occupancy rates at these malls were 99.9%, 99.5% and 98.5% respectively.
Positive rental reversion expected from lease renewals. During 1H13, 16.4% of CT’s net leaseable area (NLA) was renewed at an average positive rental reversion of 6.4%. Going forward, with 11.9% of total portfolio (as a percentage of gross rental income) due to expire in 2H13, we believe CT will have minimal difficulties renewing the majority of these leases with a mid-single digit positive rental reversion.
AEI and development on track. The AEI and development at both phase 1 of Bugis Junction and Westgate (currently c.70% pre-occupied) continues to remain on schedule, and expected to commence operation by 4Q14. Concurrently, CT has completed phase 1 of IMM’s repositioning exercise and will continue to explore phase 2 going forward.
Upgrade to BUY and higher TP of SGD2.21. During this quarter, CT announced a slightly stronger portfolio occupancy rate of 99.1% (vs 98.2% of 1Q13). Together with stable 1H13 tenant sales and shopper traffic, +3.3% and +4.8% y-o-y respectively, we remain confident with CT’s ability to post strong earnings for the rest of FY13. As we roll over to FY14F earnings, we upgrade CT to a BUY, with a slightly higher DDM-based (COE: 7.8%, TGR: 2.0%) TP of SGD2.21.
Publish date: 22/07/13