Wednesday, September 11, 2013

CapitaMalls Asia: Stabilizing fundamentals in China (OCBC)

CapitaMalls Asia:
Fair value S$2.55
add: 12m dividend forecast S$0.04
versus: Current price S$1.88

Stabilizing fundamentals in China
•Chinese data points to modest recovery
•Key positive for CMA’s China portfolio
•Long term outlook remains intact

Latest Chinese economic data-points has mostly been above view, painting a picture of modestly recovering fundamentals. Over the last month, the Chinese PMI, trade and inflation figures have mostly beat expectations which increasingly establishes a base case for at least a 7.5% economic growth rate this year – the target set by Chinese authorities.
We look forward to Chinese industrial production and retail sales reports today, which are expected to further add to signs of recovery. We believe these are key positives for CMA and reinforces the long-term outlook of its Chinese mall portfolio, which has continued to put up firm numbers year to date. 1H13 tenants sales at CMA’s Chinese malls grew at 9.5% YoY on a psf basis; excluding tier 1 cities, tenant sales grew by 11.0% YoY. Long term tailwinds from the secular growth in Chinese retail consumption remain intact, in our view. Maintain BUY with an unchanged fair value estimate of S$2.55.

Signs of economic stabilization in China
After significant uncertainty over the last twelve months about the extent of China’s economic slowdown, we note that latest data-points have been mostly above view, painting a picture of modestly recovering fundamentals. In early Sep, we saw the HSBC PMI increased to 50.1 for Aug 2013 – above expectations and up from an 11-month low of 47.7 in Jul 2013 – which suggests that the Chinese manufacturing sector has turned the corner on new orders and output. This was corroborated by the official PMI a week later which also rose to 51.0 for Aug 2013 and beating market expectations. In addition, Chinese authorities yesterday reported that exports increased more than expected in Aug 2013, rising 7.2% YoY and beating a 5.5% consensus. Inflation data was also positive with consumer prices coming up 2.6% which left room for extra stimulus from authorities should we see a sudden downside acceleration. We believe these datapoints increasingly point to a base case of at least a 7.5% economic growth rate this year, which is the target set by authorities. We look forward to Chinese industrial production and retail sales reports today, which are expected to further add to the picture of recovery.

Long term fundamentals of Chinese mall portfolio intact
We believe increasing signs of stabilizing economic fundamentals in China reinforces the outlook of CMA’s Chinese mall portfolio, which has continued to put up firm numbers year to date. 1H13 tenants sales at CMA’s Chinese malls grew at 9.5% YoY on a psf basis; excluding tier 1 cities, tenant sales grew by 11.0% YoY. Same-mall NPI growth is up 12.1% YoY in 1H13 and Chinese portfolio-wide occupancy rates is at a healthy 96.9%.

Maintain BUY
We rate the stock with a BUY rating and an unchanged fair value estimate of S$2.55. Long term tailwinds from the secular growth in Chinese retail consumption remain intact, in our view.



Source/Extract/Excerpts/来源/转贴/摘录: OCBC-Research,
Publish date: 10/09/13

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