Monday, February 3, 2014

Capitamall Trust -All eyes on Westgate (DBSV)

Capitamall Trust
HOLD S$1.89
STI : 3,133.74
Price Target : 12-Month S$ 2.16
All eyes on Westgate

• Strong end to 2013; DPU of 2.72 is up 8.6%
• Asset enhancements to drive growth; acquisitions to be selectively in the medium term
• HOLD call maintained, TP S$2.16

Highlights
Strong end to 4Q13. Topline and net property income grew 6.9% and 11.1% to S$178.2m and S$125.4m respectively. This was largely attributable to the completion of: (i) Asset enhancement initiatives (AEIs) at Atrium and IMM
, (ii) Westgate Mall which opened on 2nd Dec’13, and (iii) Tenant sales (+2.5% y-o-y) underpinned by healthy portfolio rental reversions of 6.3% and high tenant retention rate of c.83%. Property expenses remained stable, due to management’s tight rein on costs. Distributable income of S$94.4m (inclusive of S$3.5m income retained in the previous quarter) was higher by 18.3%, translating to a DPU of 2.72 Scts, +8.6% y-o-y. NAV uplifted to S$1.71/unit. Cap rates held steady at c.5.35%- 5.7%, after compressing by 15-25 bps during the June revaluation. The Trust’s portfolio grew by S$158.4m, and NAV increased to S$1.71/unit as a result.

Our View
Asset enhancements to drive growth; acquisitions to remain selectively in the medium term. Growth in FY14F will be largely underpinned by the full-year contribution of newly opened
Westgate retail mall (90% leased) and the completion of Phase 1 of AEI works at Bugis Junction in 4Q13, which involved converting space recovered from BHG on Levels 2 and 3 to feature new specialty shops. Phase 2 of AEI will begin in 1Q14, and this will entail further conversion of Level 1 space recovered from BHG, as well as minor works to improve the efficiency and visibility of the newly refurbished areas.

The acquisition of the remaining 70% stake in Westgate (held by Capitaland and CapitaMalls Asia) remain a viable proposition, but it is likely to happen only in the medium term once the mall stabilises.

Sale proceeds from Westgate office tower to be redeployed. The proposed sale of the Westgate office tower block for S$579.4m (CMT’s share est. at S$173.8m) will crystallise part of its return for the project. We understand that the proceeds are likely to be received only upon TOP, and management intends to redeploy the funds towards AEIs /developments.

Recommendation.
HOLD maintained, TP S$2.16. Our HOLD call is maintained, given limited upside to our target price objective. CMT offers FY14-15F yields of 5.8% to 6.0%.




Source/Extract/Excerpts/来源/转贴/摘录: DBSV-Research,
Publish date: 24/01/14

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