Thursday, July 18, 2013

CapitaMalls Asia : Secures Beijing mall tender; to be acquired by CRCT (DB)

CapitaMalls Asia
Price at 12 Jul 2013 (SGD) 1.92
Price target - 12mth (SGD) 2.09
52-week range (SGD) 2.24 - 1.55
Secures Beijing mall tender; to be acquired by CRCT

CapitaMalls Asia has announced that it has secured the tender for Grand Canyon Mall in Beijing for RMB1.74bn (RMB26,000psm). As part of its right of first refusal for completed properties, CRCT has exercised a call option to acquire the property subject to government approvals and financing. CRCT will fund the acquisition via existing cash, new debt and c.RMB200-400m (S$50- 80m) in new equity financing. CRCT expects to complete the acquisition in 2Q2014. Management stated that the bid was at the reserve price of the Capital Airport Real Estate Group, who had shortlisted a selection of qualified candidates. Following the acquisition, CMA will have a stake in a total of 10 malls in Beijing.

Grand Canyon Mall is currently 93% occupied with an NLA of 43,000sqm, in Fengtai District, Beijing. The location is near major bus routes, and a subway station, 1 station away from Beijing South Railway Station. The asset has a a monthly footfall of over 1 million customers/month. Currently, Grand Canyon Mall has an NPI yield of 3.5% and management expects this to rise to 5% within the next year. Notably, current passing rents are c.50% below market rents, with 27% of leases expiring this year, and an additional 25% of leases expiring over in 2014-2015. Yields are also expected to be boosted by the raising of occupancy levels to 100%. Management believes that it will be able to raise the NPI yield to 7-8% over the next 2-3 years, broadly on par with its Capitamall Xizhimen asset located to the north. The company stated that it believes that execution risk will be manageable given the strong existing tenant base.

Deutsche Bank view
Although the impact to CMA’s SOTP is marginal, believe that the acquisition is positive in that it expands the company’s presence in Beijing while growing its AUM. The company noted at the briefing that land costs for greenfield projects have been rising, and that that its preferred strategy will be for CRCT to expand via third party acquisitions, as it would allow the company to continue to grow its footprint, vs. simple capital recycling. CMA is currently trading at a 17% discount to our SOTP of S$2.32, maintain Hold.

Source/Extract/Excerpts/来源/转贴/摘录: Deutsche Bank
Publish date: 16/07/13

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