Wednesday, December 11, 2013

CapitaMall Trust : AEIs to buffer slower rents (CIMB)

CapitaMall Trust
Current S$1.94
Target S$2.06
AEIs to buffer slower rents

CMT’s existing portfolio is now almost fully occupied. Asset enhancement initiatives (AEIs) and the completion of Westgate will drive FY14-15 DPUs. These should help to offset a more moderate rental growth outlook, with retail sales and shopper traffic expected to stay flat.

We tweak our rental growth assumptions downwards and lower our longer-term DPU estimates by 1% (FY15 DPU down 0.4%). Our DDM-based target price (7.4% discount rate) is thus lowered. Under our new rating structure, our recommendation changes to Hold from Neutral. We see positive surprises in retail sales and accretive acquisitions as catalysts.

3Q13 review
The completion of AEIs at Bugis+ and The Atrium as well as the completion of J-Cube contributed the bulk of the 12.9% yoy growth in 3Q13 NPI. As a result, the DPU rose 9.7% yoy in 3Q13. For CMT’s remaining portfolio, NPI growth was flatter, at 4.6% yoy due to the 6.3% positive rental reversion for the new leases/renewals achieved three years ago (2.1% p.a.). Its portfolio occupancy remained robust at 99.5% but the overall YTD tenant sales growth slowed to 2.8% yoy.

AEIs and asset completions to drive FY14-15 DPU
FY14 will see rental contributions from Phase 1 of Bugis Junction AEI (95% preleased; expected completion in 4Q13) and the completion of the Westgate retail mall (70% preleased). The construction of Bugis Junction phase 2 AEI is expected to start in 1Q14 and it is projected to be completed by FY15. CMT also announced that it will convert around 25-30k sf of the rooftop space in Tampines Mall; it is expected to return 8% on the S$36m capex (c.S$3.4m) to CMT’s revenue. This is slated for completion in FY15. All these will help drive DPUs in FY14-15 and help offset a moderating retail sales outlook.

Valuation and catalysts
CMT’s portfolio remains defensive but at a P/BV of 1.2x and compressed FY15 yield of 5.9% (against a rising interest rate environment), we believe that positive surprises in retail sales and accretive acquisitions are needed to re-rate the stock. The potential to reposition Funan Centre could also be another stock price kicker.

Source/Extract/Excerpts/来源/转贴/摘录: CIMB-Research,
Publish date: 02/12/13

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