Price (at 08:55, 27 Aug 2013 GMT) S$1.90
Valuation S$ 2.46
Resilience shines through
CapitaMall Trust presented at Day One of our Asean conference in Singapore.
Rent growth of 6.4% in 1H13. Management expected some slowdown in rent reversions but was pleasantly surprised by achieving 6.4% reversions in 1H13. Shopper traffic +4.8% whilst tenant sales +3.3%. Whilst the portfolio is 99.1% occupied, it also means there is little retail space left to meet demands of new to market retailers. There are macro headwinds to contend with going forward, like slower population growth, control of foreign workers and difficulty in getting staff from the tenants’ perspective.
Asset enhancement initiatives (AEIs). The good news for CT is that the three malls that completed AEIs in 2012 will see a full year contribution to net property income and on track to achieve the targeted RoI. Ongoing AEIs at Bugis Junction has seen 95% of area pre-committed. The group will plan for more AEIs to help drive DPU growth.
Acquisitions. Of the four Singapore assets in its sponsor’s portfolio, Star Vista and ION Orchard are operational whilst Westgate and Bedok Mall will be operational at the end of 2013. Of these, the group seems keener on Westgate and Bedok Mall given that they fit into its necessity shopping profile (72.8% of revenue in 2012).
Debt profile. Current gearing is 34.9% and the group is comfortable to go to 40%. More importantly, CT continues to seek opportunities to extend its debt maturity with the aim to lower the tower of debt in a given year. Current average term to maturity is 3.8 years.
Earnings and target price revision
No changes to DPU estimates and TP.
12-month price target: S$2.46 based on a DCF methodology.
Catalyst: Positive rent reversions for 2H13 and accretive acquisitions.
Action and recommendation
CT is poised to report the highest DPU growth of 14% in FY13 amongst our SREIT coverage. CT is one of our key SREIT picks, with a potential upside of more than 30%.
Publish date: 27/08/13